Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL

Order for consideration of Lords amendments read.

To be considered upon Tuesday next.

KING'S COLLEGE LONDON BILL

Lords amendments agreed to.

Oral Answers to Questions — NORTHERN IRELAND

Trade Unions

Mr. Loyden: asked the Secretary of State for Northern Ireland when he last met the Northern Ireland trade unions.

The Secretary of State for Northern Ireland (Mr. Roy Mason): Northern Ireland Ministers are in constant touch with representatives of the trade unions in Northern Ireland in the course of our ministerial duties and departmental responsibilities. In the past 12 months, we have had more than 50 meetings with trade unions and trade union leaders. I also spoke at the economic conference organised by the Northern Ireland committee of the Irish Congress of Trade Unions on 8th March 1978.

Mr. Loyden: I am grateful to my right hon. Friend for that reply, and, of course, I accept that in his day-to-day work as a Minister he is in constant touch with the trade unions on matters affecting himself and the trade unions. But does he not agree that sectarianism is probably at

its lowest level at the point of production and, therefore, that workers, through their trade unions, could play a more positive role in Northern Ireland in seeking the solutions which right hon. and hon. Members in all parts of the House seek? Does he not agree, further, that opportunity should be taken to develop the role of the trade unions in Northern Ireland?

Mr. Mason: My hon. Friend is quite right. The Northern Ireland committee of the Irish Congress of Trade Unions is playing an important part in crossing the sectarian divide in the Province. None of the trade unions has a sectarian base. They do not involve themselves in sectarianism in Northern Ireland. Neither do they become involved in the political wrangles in Northern Ireland. As such, they are a credit to the Province, and we have a good working relationship with them.

Mr. Kilfedder: Is not the right hon. Gentleman aware of the widespread discontent amongst many full-time trade union officials in Northern Ireland about the fact that, although some of their members are appointed to statutory boards—indeed, one has been appointed to no fewer than 20 statutory boards—many other trade unionists never receive any appointment? What is the reason for this discrimination which gives £3,000 to £4,000 a year to a select few trade unionists?

Mr. Mason: For nominations to these special boards the trade unions themselves are approached, and they make their nominations. But I must remind the hon. Member that at least 40 trade union leaders in Northern Ireland are serving the Province in various other professional and semi-professional capacities.

Mr. Fitt: As the trade unions are such a credit to Northern Ireland, why has my right hon. Friend so far resisted the request made by them, especially by Terry Carlin, the Northern Ireland officer of the ICTU, to have the Quigley report debated and its conclusions confirmed or rejected by this House?

Mr. Mason: My hon. Friend will recognise that the new economic concept for Northern Ireland has moved on from the Quigley report. Using that as a base, the Economic Council, with its fair share


of trade union representation, is dealing with it now on a more forward-looking plane. The trade unions themselves are playing a positive part in that role.

Mr. Bradford: When the Secretary of State met the trade unions, did they raise the issue of the high cost of electricity and gas in the Province? If so, will the right hon. Gentleman endeavour as soon as possible to reduce the cost, especially that of gas, which is three times that in any other part of the United Kingdom?

Mr. Mason: Yes. The Economic Council has been working on that. It has prepared a paper on the future of energy requirements in the Province, and gas is one of the topics that is touched upon.

Mr. Biggs-Davison: Is the Secretary of State aware that we on the Opposition Benches yield to no one in our admiration of the trade unions and trade unionists in Northern Ireland for the part they have played in maintaining production and industrial harmony through years of terror and difficulty?

Mr. Mason: I am obliged to the hon. Member. He is quite correct. In spite of the troubles, the trade unions, allied with the management of industry, have managed to achieve a higher manufacturing output, higher productivity and a better industrial relations record than Great Britain as a whole. That is in spite of seven years of trouble.

Mr. Litterick: On a point of order, Mr. Speaker. The Question on the Order Paper in my name—No. 17—is identical to Question No. 1.

Mr. Speaker: I noticed that. That is why I did not call the hon. Member. His Question will be reached.

Criminal Offences (Sentences)

Mr. Wm. Ross: asked the Secretary of State for Northern Ireland what consideration he has given to the length of sentences currently provided for serious criminal offences in Northern Ireland: and if he will make a statement.

The Minister of State, Northern Ireland Office (Mr. J. D. Concannon): The length of sentences in particular cases is for the courts to decide within whatever maxima are laid down in the relevant

statutes. However, criminal legislation in Northern Ireland is kept under constant review and as recently as last year Parliament approved substantial increases in penalties for offences provided under both the ordinary criminal law and emergency provisions legislation.

Mr. Ross: Since it is clear that the terrorists have not responded to the very generous remission of sentences that the Minister introduced a couple of years ago, will he now consider returning to the formal level of remission of sentences so that there is no possibility of criminals in Northern Ireland being treated as a group apart?

Mr. Concannon: As the hon. Member knows, there was no probation service in Northern Ireland. As the House passed this provision three years ago, it is up to the House to look at it and put forward any amendment to it. If people keep their noses clean in prison, it will still have an effect. Those who do not do so—and there are quite a number who do not—lose out. Up to now, they have lost nearly 300 years of remission. That should please the hon. Member.

Mr. Molyneaux: I refer to the report of the advisory council on the penal system. Will the Minister confirm that, whatever the Government's eventual decision on this report, they will not apply it to the terrorists or those who commit related crimes in Northern Ireland and elsewhere?

Mr. Concannon: I have read the report all the way through. I think that it has been misunderstood to some extent. On the point that the hon. Member has raised, the advisory council has made it absolutely clear that offenders who pose the risk of serious harm should be liable to a penalty in excess of the normal maximum. Clearly this would have implications for the people the hon. Gentleman has mentioned. We could increase the length of sentence, even to life imprisonment.

Industrial Investment

Mr. James Lamond: asked the Secretary of State for Northern Ireland if he is satisfied with the level of industrial investment in Northern Ireland.

Mr. Concannon: I cannot he satisfied with the level of investment while unemployment in the Province remains so high. None the less, there has been a good response to the greatly enhanced incentives which my right hon. Friend announced last August, and the recent decision by General Motors to set up a £16 million seat-belt factory in Northern Ireland is particularly encouraging. The provisional figure for jobs promoted in the first half of 1978 in companies new to the Province is 1,200, compared with a half-yearly average of 225 between 1972 and 1977, and vigorous efforts will continue to be made to publicise Northern Ireland's considerable advantages as a location for new investment.

Mr. Lamond: Can my right hon. Friend confirm that Government expenditure in Northern Ireland is now running at a level of over £1,000 a year for every man, woman and child in the Province? That makes a total of nearly £1,000 million a year. Has he any intention of studying the impact on health, housing, jobs and education in Northern Ireland should the policies of the Leader of the Opposition be carried out and public expenditure be cut throughout the United Kingdom, including Northern Ireland?

Mr. Concannon: I can confirm that the capital expenditure per head of population in Northern Ireland is just over £1,000. In fact, last year it was £1,122 per head. Expenditure for the other regions was £754 per head in England in 1976–77, £875 per head in Wales and £948 per head in Scotland. I sometimes wish that this Government would get some credit for this.

Mr. Neave: The whole House will applaud what the right hon. Gentleman has said about the efforts of the Government to increase investment in Northern Ireland. Is he aware that investors need a clearer picture of the overall industrial policy of the Government for Northern Ireland? Is there a general economic plan? I refer here to the Secretary of State's words about the Quigley report, which was mentioned recently by Sir Charles Carter, chairman of the Economic Council. Will the Minister say what the plan is, and will he say whether the Government intend to continue with several job creation agencies or whether they intend to co-ordinate them?

Mr. Concannon: The whole time that I have been in this Department I have been acting upon the Quigley report. It would be very strange if I did not, because the head of my Department is Dr. Quigley himself. The special agencies in Northern Ireland are tailored to fit the situation in the Province, and I see no reason why we should change them. These agencies are doing a good job in their relative fields, and I do not want to disturb them.

Sir G. de Freitas: In our discussions about Northern Ireland, is it not very important to remember that there are enormous economic possibilities for development there? Apart from the present investment, is not the forecast investment per capita higher than in England, Scotland or Wales?

Mr. Concannon: Yes, that is correct. I am expecting investment to be even higher this year. The subvention from the rest of Great Britain to Northern Ireland was £314 million in 1973–74. In 1977–78, if one includes the one-off payment to the electricity service of £250 million, that subvention will have reached £950 million.

Mr. Michael McNair-Wilson: Is there not a case to be made for a single corporation to co-ordinate industrial development and ensure that that development goes into areas of particularly high unemployment?

Mr. Concannon: There is a single agency, and that is my Department, with the Secretary of State and myself as Minister working on this. We have agencies working for us. We give high incentives to industry to locate in the areas of high unemployment. However, I stress that in my travels around the world I have found that there are certain areas which, no matter how much I talk or how much money I offer for them, are their own worst enemies. Until they improve their image, there is very little that one can do.

Prisons (Deputation of Members)

Miss Maynard: asked the Secretary of State for Northern Ireland if he will now agree to a deputation of hon. Members going to Northern Ireland to visit the prisons there, including H block, in the light of recent events.

Mr. Concannon: Since the beginning of the year, 12 hon. Members have made general interest visits to Her Majesty's Prison, Maze. Such visits, however, inevitably create a certain tension in the prisons and place a considerable burden on prison staff. In the present circumstances of an intensified protest over the special category issue at Her Majesty's Prison, Maze, I have concluded that there should be no further general interest visits by hon. Members for the time being. I hope that it will be possible to allow a resumption of these after a period of calm. Visits to constituents will, of course, be unaffected.

Miss Maynard: I find that reply as disappointing as the one I received when I asked the same Question some weeks ago. Does not the Minister feel that, if a deputation of MPs was allowed to go, it would help to allay disquiet in many quarters about the situation in the Maze? Does not this kind of answer give the impression that we have something to hide? Does my right hon. Friend agree that the situation in Northern Ireland and the problems there can be solved only by a political answer and not by force of arms or violence from any quarter?

Mr. Concannon: I wish that my hon. Friend would at times accord me the same generosity when I tell her things as she seems to accord to just about everyone else. What is happening in these prisons has been brought on by the inmates themselves. They are deliberately fouling and messing up one of the best prisons in Europe. If I announced that a deputation of Members was going to visit Her Majesty's Prison, Maze, I would certainly find that there was an intensification of the efforts of the people inside. Hon. Members must understand that their efforts are aimed at securing special category status. This House has on more than one occasion stated quite clearly that it wishes to see the ending of the special category. I am doing all I can to pursue this aim, and I wish that everyone in this House would back me to the hilt.

Mr. Carson: Is the right hon. Gentleman aware that it is impossible to integrate children in schools in Northern Ireland? Is he also aware that even

the Minister responsible for housing in Northern Ireland is talking about keeping Protestants and Catholics apart by putting them in separate factories'? Does he not agree that we should at present segregate Protestant and Catholic prisoners, some of whom have been sentenced for the foulest crimes? Will he also tell us how many Protestants are taking part in the prison protests at present?

Mr. Concannon: First, when looking for jobs in the Province I certainly do not look for Protestant or Catholic jobs. I am looking for jobs for the Province as a whole and at where one can put them for the Province as a whole. There is nothing in the suggestion of job segregation, because after the legislation of last year it would be illegal anyway. As regards how many Protestants are envisaged to be involved in the present protests in the Maze, though I do not like to use the words "Protestant" or "Catholic" with regard to prisoners, as the hon. Gentleman has asked me a straight question I will give him a straight answer. The answer is "No."

Mr. Litterick: Does the Minister recognise, however, that the Question asked by my hon. Friend the Member for Sheffield, Brightside (Miss Maynard) was not about the possibility of what the Minister called a general interest visit but about the possibility of what I consider would more accurately be called a specific interest visit to this prison?
It would be a specific visit to examine at first hand—by talking to the people involved, the staff of the prison and the inmates—the circumstances in which the present situation has arisen there.

Mr. Concannon: The reason why this situation has arisen in that prison is that it is a straight protest by those concerned because they wish to have special category status given to these prisoners. This House, two and a half years ago, said that this had to end, and there was general agreement to that effect in this House. I am trying to end this situation, and it is working. If hon. Members want to help those people, I can assure them that if they intend to press for a visit to Her Majesty's prison now, they will be adding succour and help to those who are involved. These prisoners are doing some


terrible things, such as fouling their own cells, which I find disgusting. The only thing I impress upon hon. Members is that the prisoners' own actions are keeping them in prison that much longer. They have lost nearly 300 years of remission of sentence. When I consider some of the heinous crimes that some of these people have committed, I am not sorry that we are keeping them in prison a little longer.

Mr. Farr: Does the right hon. Gentleman recognise that many of us on the Opposition Benches are full of admiration for the prison officers in Northern Ireland and the excellent way in which they are doing a very difficult job at the moment? Does he further recognise that many of us also feel that at this particular time a visit by Members of Parliament—bearing in mind the composition of such a party—could indeed do much more harm than good?

Mr. Concannon: I thank the hon. Member for seeing it in that way, because that is exactly my position at this moment. However, constituency Members and Members who represent prisoners will not be affected. I believe that most of the hon. Members have visited the prisons fairly recently.

Mr. Flannery: Will my right hon. Friend accept from me that he is unduly touchy about this particular question in the way that he imputed a wrong motive to my hon. Friend the Member for Sheffield, Brightside (Miss Maynard)? Does he further accept from me that there is not unanimity in this House, no matter how much the United Ulster Unionists cheer him every time he speaks? Finally, does he accept from me that, in the light of the Amnesty International report, if he does not allow Members of Parliament from this House to visit that gaol there will be a feeling among the members of the general public that we have something to hide, and that we should be doing the democratic cause justice by allowing Members of Parliament to go and look at that prison?

Mr. Concannon: I completely refute just about everything my hon. Friend has said.

Mr. Flannery: I know that my right hon. Friend will do that.

Mr. Concannon: I do not know what the Amnesty International report has to do with the Northern Ireland prison service at this moment in time. Anyone who has visited this prison in normal circumstances will know full well that it is a new prison and one of the best in Europe with the best facilities. What is happening is due to only a certain minority—and it is a minority; just two of the H blocks out of eight. If my hon. Friend wishes to exacerbate the trouble that I already have in these prisons, he should carry on with what he is doing, because these people will hinge on every word that is said in this House today and will escalate their protests, thereby making the job of settling these prisoners down and ending the special categories that much more difficult.

Mr. Molyneaux: Does the Minister agree that the presence of such a deputation would, in fact, play into the hands of the terrorist propaganda machine and that it would inhibit very severely the efforts of himself, the prison authorities and all who are engaged in the welfare of the prisoners from restoring normal discipline to the prison, including the abolition of the special category?

Mr. Concannon: I think that the hon. Gentleman, along with other Members, paid a visit to the prisons not so long ago, and I thank him for those remarks. I believe he understands the situation and the propaganda value that such a visit would have at present.

Political Talks

Mr. Ron Thomas: asked the Secretary of State for Northern Ireland what plans he has to have further talks with the various political groupings in Northern Ireland.

Mr. Biggs-Davison: asked the Secretary of State for Northern Ireland whether he will make a statement about the talks between his Department and representatives of political parties.

Mr. Mason: As I told the House on 30th June, I have periodic meetings with local political leaders to exchange views on security policy and on economic problems, as well as to discuss possible constitutional advances.

Mr. Thomas: Does not my right hon. Friend agree that the appalling tragedy of the death of the young boy on Tuesday and the soldier killed by a bomb yesterday are clear indications that these senseless killings will go on until we get a political settlement based on equal human rights? I urge the Minister—because the initiative can come only from him—to do whatever he can to bring about political talks. That is the only way that there is any glimmer of a settlement in this terrible situation.

Mr. Mason: I agree with my hon. Friend. If he follows matters in the Province closely, he will know that I have laid before the political parties in Northern Ireland a five-point plan which indicates how best we can move towards devolved administration based on the principles laid down by this House. That is, that it should be based on partnership and participation. I have taken the initiative and laid the proposals before the political parties. I can only hope that they will now seize upon those proposals, even if it necessitates changing them according to how they would like to see the Province evolve with its regional tier of administration. It is not a hard and fast blueprint that I have laid before them.

Mr. Biggs-Davison: Whatever the truth of the report in The Guardian that a proposal before the national executive committee of the Labour Party for an upper tier of local government had been suppressed, are not the Government and the Opposition now agreed in supporting the enlargement of the responsibilities of local government which, indeed, is a feature of some of our current Northern Ireland legislation? Is not the best line of advance in the sphere of local government?

Mr. Mason: It depends on one's definition of local government. If it is British-style local government being imposed upon the Province of Northern Ireland based on majority rule, I fear that the minority in the Province would reject that sort of approach. Indeed, they might even make sure that it did not work. Therefore, one has to be careful about the definition. If one feels that filling the Macrory gap between district councils and Westminster is a form of local government based on the principles of partner-

ship and participation, that sort of regional authority is worth examining.

Mr. Powell: Is the right hon. Gentleman aware that all political groups in the Province which enjoy any substantial electoral support are represented in this House and are, therefore, at all times available for consultation?

Mr. Mason: I suppose that the right hon. Gentleman is placing himself as one of the leaders of one of the parties and he himself would like to have the consultations here as distinct from in the Province. But I try to keep his party as well as the other Ulster parties aware and abreast of my thinking on the future of the Province.

Mr. Fitt: Taking up the statement of my right hon. Friend the Secretary of State that he has had discussions with Northern Ireland political parties on the question of security, may I ask him to make it quite clear to the House that in the discussions with, at least, the SDLP, that party has had no say in security? If it was having discussions on security, it would completely disagree with some aspects of security, particularly that which is contained in the yellow card instructions at present. Is my right hon. Friend aware—[HON. MEMBERS: "Too long.")—that regulation no. 2 on that card states:
Never use more force than the minimum necessary to enable you to carry out your duties, and always try to handle the security position by other means rather than using firearms"?
In this connection—[HON. MEMBERS: "Too long."]—can my right hon. Friend indicate now what is his opinion of the tragic killing of young John Boyle in Northern Ireland on Tuesday? Does he believe that it is necessary to have an inquiry when the whole community—[Interruption.]

Mr. Speaker: Order. I hope that it will be possible for the hon. Member to raise that matter under another Question. This is a Question relating to the political groupings in Northern Ireland.

Mr. Fitt: I was taking up my right hon. Friend on the question of the security discussions that he has had, Mr. Speaker. I am asking him to make it quite clear that the SDLP does not agree with the yellow card instructions, and it


certainly disagrees with the way that these have been interpreted by certain members of the security forces.

Mr. Mason: I am sorry to hear what my hon. Friend says. His question relates more directly to security than to political groupings. However, the yellow card really holds back any member of the security forces from being either impulsive or too hasty in his action—

Mr. Fitt: It did not do so on Tuesday.

Mr. Mason: —but on occasions when a person has a bomb in his hand, or an Armalite rifle, the yellow card will still allow the security forces to shoot. We know that a number have already been killed or seriously maimed because they hesitated for too long.

Planning Applications

Mr. Powell: asked the Secretary of State for Northern Ireland whether he is satisfied that there is adequate use of public inquiry in connection with departmental decisions on planning applications involving the general public interest in a neighbourhood.

The Under-Secretary of State for Northern Ireland (Mr. Ray Carter): Yes, Sir.

Mr. Powell: Is the hon. Gentleman aware that it will be greatly advantageous if he errs in the direction of holding more rather than fewer public inquiries, whether they are on large schemes such as the Kinnahalla dam or smaller planning matters such as caravan sites, since this method brings public opinion into play and gives all the impression that they have been consulted?

Mr. Carter: I could not necessarily accept everything that the right hon. Gentleman has said. It is normally the case that we would try to resolve disputes about planning applications without resorting to the lengthy and costly business of a public inquiry. But it certainly is our intention to consult, and in the last case that the right hon. Gentleman mentioned—the caravan site in his constituency—we consulted, just about everyone, including the local authority, before coming to a decision.

Policing and Administration (Community Participation)

Mr. Michael McNair-Wilson: asked the Secretary of State for Northern Ireland what steps he is taking to improve the community's participation in the policing and administration of the Province.

The Under-Secretary of State for Northern Ireland (Mr. James A. Dunn): We are anxious to give locally elected representatives extensive responsibilities for the administration of the Province. That is the purpose of the five-point plan. In the meantime, we shall continue to involve the people of Northern Ireland as far as possible through the various arrangements for consultation that have been developed and extended over the past few years. As regards policing, my right hon. Friend the Secretary of State seeks to ensure that the membership of the Police Authority is, so far as practicable, representative of the whole community.

Mr. McNair-Wilson: Does not the Minister agree that one of the weakest parts of the Government's policy in Northern Ireland has been the creation of any cross-community co-operation? Have the Government any initiatives in this direction? Has there been any increased recruiting from the minority community into the security forces, the police and the UDR?

Mr. Dunn: On the last question, I really could not give clear indications, although there are some suggestions that there are increased numbers of recruits from the minority community. However, as the hon. Gentleman will know, no records are kept on the basis of the first application, so it is hard to give the answer that he seeks.
On the other broad front, every endeavour is made through consultative processes, and, indeed, by local committees, to encourage people to participate and to create relationships with the security forces in the areas in which they live, work and enjoy life.

Mr. Goodhart: What hope does the Minister have of persuading members of the SDLP to participate more fully in the work of local security committees?

Mr. Dunn: The same as I would have of persuading the Conservative Party not to keep on asking the same question, to which they know the answer.

Mr. Fitt: Does my hon. Friend agree that it will be difficult to persuade the SDLP or any other responsible party in Northern Ireland to participate in policing Northern Ireland through the agency of the Police Authority when two very distinguished persons have resigned from that body on the ground that they were kept in the dark and that the Minister ran it in the way he wanted to run it and did not want their views?

Mr. Dunn: I can understand my hon. Friend's anxiety, but he is not quite informing the House of the facts. Those two people have given notice that they intend to withdraw. These matters are now being considered. It would be wrong of me to pre-empt what answers will come from the consultations and considerations. But it is also true that it is very difficult for those in my hon. Friend's circumstances to persuade people of his own political party to join in endeavours towards security when there is so much reluctance, and there are difficulties which have to be overcome. But we are trying as hard as we possibly can to dissipate that fear and anxiety. We hope that we have my hon. Friend's help in this matter.

Secondary Schools

Mr. Freud: asked the Secretary of State for Northern Ireland how many schools in the secondary sector are integrated; and what proportion of the secondary school population this represents.

Mr. Carter: It is known that several schools are attended by pupils of both the main religious denominations, but the Department of Education for Northern Ireland does not collect statistics of the numbers of pupils enrolled at schools according to their religious denominations. No schools have yet applied for controlled integrated status under the Education (Northern Ireland) Act 1978, but it is really too early to expect this to have happened. The Department of Education only recently issued a circular to schools, school authorities and other interested bodies drawing attention to the Act's provisions.

Mr. Freud: Until there is an increase in integrated schools, will the Minister seek to encourage the pupils of sectarian schools to join together in certain academic classes, as is the case in neighbouring schools in this country? Will he bear in mind that, until there are integrated schools, there is little hope of ending the ghetto development in the communities?

Mr. Carter: We shall certainly not attempt any artificial integration, in the academic levels or elsewhere. This is an education matter and it has nothing to do with questions of sectarianism or integration. On the general question of integration, we have made it quite clear as a Government, and my noble Friend has made it quite clear, that this is a matter for the community itself to decide.

Mr. Lee: Is not the whole miserable business of segregated education in Northern Ireland about the best argument that one could ever produce for the total abolition of religious education?

Mr. Craig: Does the Minister agree that segregated education tends to make people live in separate areas, and that this is not good enough for the community spirit?

Mr. Carter: That is so obviously true that I do not really know how I can reply to it.

Police Vehicles (Protection)

Mr. Farr: asked the Secretary of State for Northern Ireland what consideration he is giving to the special protection of the occupants of both marked and unmarked police vehicles in Northern Ireland.

Mr. Dunn: I know that the protection of occupants of police vehicles from terrorist attack is very much in the minds of the Chief Constable and Police Authority. Steel-protected Land Rovers continue to come into service and protection is available for other vehicles as appropriate. The hon. Member will understand, however, that it would not be in the interests of security to go into details.

Mr. Farr: Can the hon. Gentleman assure the House that, so far as is possible, patrolling is of a haphazard nature and not to any conformed routine? Also,


what consideration has been given to introducing new, very lightweight armoured-type materials, which have been pioneered very successfully for, for instance, the Chieftain tank in Britain?

Mr. Dunn: On the first question, I would not pretend to intervene on operational day-to-day requirements. They are a matter for the Chief Constable. On the second part of the hon. Gentleman's supplementary question, if the Chief Constable wishes such provision to be made and that equipment should be purchased manufactured from the materials that the hon. Gentleman brings to the attention of the House, we shall await his request.

Security

Mr. Craig: asked the Secretary of State for Northern Ireland if he will make a further statement on the security situation in Northern Ireland.

Mr. Mason: Since I answered a similar Question on 15th June, the general level of violence has remained relatively low. Terrorist attacks continue, however, particularly against members of the security forces. The murder yesterday of Private Fisher brings to 19 the number of security force personnel killed this year. In the same period last year there were 30 such deaths.
The police and Army remain alert to the terrorists' capability and are maintaining their drive to bring to justice those responsible for violence. So far this year 497 people have been charged with serious terrorist offences, including 43 with murder and 55 with attempted murder.
Finally, I must tell the House how deeply I regret the tragic combination of circumstances which led to the death of John Boyle in Dunloy on 11th July. The police are conducting a full investigation, and it would not be right for me to prejudge that.

Mr. Craig: Is the right hon. Gentleman aware that most people in Northern Ireland appreciate the progress made by the security forces? Is he also aware that people feel that a hard core of terrorism is not being adequately tackled? Many people, such as Martin Meehan, have been called in for questioning, but the questioning never seems to lead anywhere. Does the right hon. Gentleman agree that there is a growing campaign

to denigrate the work of the security forces? I hope he will bear in mind the enormous difficulties and dangers under which the security forces operate, and that when allegations are made he will bear in mind that security forces have shown remarkable restraint in operating in the most difficult circumstances.

Mr. Mason: I very much appreciate what the right hon. Gentleman says. As somebody who has had some responsibility in the Province and who lives there, the right hon. Gentleman's words are to be respected. It is right that we must continually use the process of the law in Northern Ireland so that when we make an arrest the charge sticks and the matter is processed through a court of law. Secondly, it is true that there is a constant campaign of denigration against the security forces in Northern Ireland. We must we aware of it—and that includes awareness by this House in particular.

Mr. Bradford: Will the Secretary of State consider proscribing the Provisional Sinn Fein—that group of people who masquerade behind a political label hut who have no policies on housing, education or any other genuine political matter? Will he proscribe that organisation at the earliest possible moment if the numbers of deaths are to be reduced?

Mr. Mason: I have not in mind proscribing PSF, the political wing of the Provisional IRA. I always bear in mind that if the Provisional IRA wants to prove whether it has any political backing or any following in the community in Northern Ireland, its members will have the opportunity to do so by letting PSF stand in the elections, local or Westminster. The way to prove that is through the ballot box. Let us see what strength that movement possesses.

Mr. Fitt: Is not my right hon. Friend already aware of all the circumstances relating to the tragic death of John Boyle? Does he agree that this incident has created a deep sense of outrage throughout the whole community in Northern Ireland? In any subsequent inquiry, will the RUC have any power in interpreting the written instructions on a yellow card, or will they continue to be interpreted with such tragic effects as we have already experienced?

Mr. Mason: The principles have been laid down by this House and not by the RUC. I was personally saddened at the death of this young man. However, a full RUC investigation is taking place. This is the normal course when there is an incident of this kind. There will be a public inquest.

Secondary Education

Mr. Gow: asked the Secretary of State for Northern Ireland what recent representations he has received about the Government's proposals for the future structure of secondary education in the Province; and if he will make a statement.

Mr. Carter: The Government continue to receive representations both from those who support the decision to eliminate selection by perceived ability at 11-plus and from those who are opposed to that decision. The most recent representation received, from the Northern Ireland Public Service Alliance, representing 27,000 members in Northern Ireland, urged the Government to proceed with the introduction of comprehensive education as quickly as possible.

Mr. Gow: Does the Minister agree that under the present law he has no statutory power to impose comprehensive education in Northern Ireland? Will he undertake that there will be no such imposition, save with the full-hearted consent of the parents and teachers concerned?

Mr. Carter: We are moving on a voluntary basis. It is clear that 27,000 teachers in Northern Ireland are very much in favour of these proposals, as are many other sections of the community in Northern Ireland.

Mr. Neave: Is the Minister aware that on several occasions we have asked about the cost if all secondary education in Northern Ireland were turned over to the comprehensive system? What is the estimate of that cost?

Mr. Carter: We have not worked the figure out because we are proceeding on the basis of agreement. If we can proceed on that footing, obviously the cost will be considerably reduced compared with the cost if we were to proceed in another way.

PRIME MINISTER (ENGAGEMENTS)

Mr. Christopher Price: asked the Prime Minister if he will list his official engagements for 13th July.

The Prime Minister (Mr. James Callaghan): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.

Mr. Price: If my right hon. Friend finds a moment to polish up his first draft of the manifesto, will he turn his mind to the problem of the provision of official information to the public? Given the fact that neither the Leader of the Opposition nor her new-found bridegroom from Sidcup has ever taken this problem seriously, to the extent of not even revealing Conservative policies, will my right hon. Friend say what his policy is? Will he publish the serious study as announced in The Times by the Minister who is responsible for the Civil Service, on which doubt has been cast in a letter to that journal today?

The Prime Minister: Yes, Sir. There will be published within the next 10 days or fortnight the Government's views in a White Paper on official secrets and the reform of section 2, which was the original cause of the setting up of the Franks Committee.
That White Paper will also contain a section on the provision of information unconnected with section 2. I am glad to say that, since I originally asked Departments to examine this matter, there has been a great improvement in the amount of material issued. Indeed, only this afternoon the Minister for Social Security is issuing a detailed report prepared by officials on supplementary benefit provisions, together with a large number of supporting documents which will appear in the Library. I hope that my hon. Friend and others will read them all.

Mrs. Thatcher: When the Prime Minister goes to Bonn, will he ask the leaders of the other countries present at the summit how their Governments have done so much better than the Labour Government of the United Kingdom in the past four years in the same world conditions and


without the benefit of North Sea oil? How does he explain that the Labour Government are either bottom of the league or next to the bottom in the matter of jobs, prices, output and growth?

The Prime Minister: I am always ready to learn from anybody in these matters and to try to improve the position in this country. I am sorry that the right hon. Lady feels it necessary to denigrate the efforts of this country when there has been so much improvement in the past four years in so many of the factors to which she has referred. Although we should all be ready to learn lessons from each other, I wish that now and again she would try to speak up and say a good word for Britain.

Mrs. Thatcher: The Prime Minister has not got the point. I was criticising Britain's Government. Will he explain how in the same world conditions, and with the benefit of North Sea oil, the Labour Government have done so much worse than have the Governments of the other countries who will be present at the Bonn summit?

The Prime Minister: In the first place, the right hon. Lady is not accurate. Secondly, we took over from an Administration who left us with a three-day working week, the worst industrial confrontation in this country since the early part of the twentieth century, a vast balance of payments deficit which we have now put right, and an ascending retail price index, which is now falling. We have remedied all these things. The right hon. Lady was a member of the previous Administration and a little humility from her would not go amiss.

Mrs. Thatcher: All the information that I have used has come from Written Answers in Hansard either this month or last. What is inaccurate about the figures?

The Prime Minister: I shall be glad to look into them all, but I have had occasion before to remark on the way in which the Opposition twist the use of statistics.

Mr. Hugh Jenkins: When my right hon. Friend is looking at the draft election manifesto, will he make sure that it includes a strong section on the arts and

that the undertakings given in earlier manifestos are repeated and will be carried out by the Government that he will head after the next general election?

The Prime Minister: I am not sure what my hon. Friend is talking about in relation to manifestos.

Mr. Crawford: asked the Prime Minister if he will list his official engagements for Thursday 13th July.

The Prime Minister: I refer the hon. Gentleman to the reply that I have just given to my hon. Friend the Member for Lewisham, West (Mr. Price).

Mr. Crawford: As it is clear that the Labour Government intend to proceed with the closure of the Glengarnock steelworks and to postpone indefinitely the Hunterston steelworks, will the Prime Minister have a word with the Secretary of State for Scotland and tell him that it is not, as the Secretary of State has suggested, the SNP which is misleading the people of Scotland over the future of their jobs, but the Secretary of State himself and the Labour Government? Will the Prime Minister therefore dismiss the Secretary of State for Scotland immediately?

The Prime Minister: The hon. Gentleman might put these questions to the Secretary of State for Scotland if he wishes detailed replies to them.

Mr. Henderson: You are the boss.

The Prime Minister: Yes, but in this House and this country there is a doctrine of ministerial responsibility. When the House decides to elect me as life president, I shall assume all the responsibilities—but not until then. I understand that the major investment at Ravenscraig and the ore terminal and direct reduction plants at Hunterston are to be completed, so I do not know where the hon. Gentleman gets his information.

Mr. Dalyell: Has the Prime Minister noticed that the chairman of the Scottish Life Offices Association has seen fit to issue a public warning to his policyholders about the dangers of the SNP policy to have a pound Scots and a pound sterling? Will my right Eon. Friend investigate other areas to allow people to understand just what SNP policies are all about?

The Prime Minister: I should be very glad to learn more about SNP policies, because it seems that the more the Scottish people learn about them, the less is the support for the SNP.

Mr. Powell: If the Prime Minister is spending any time today in preparation for the meeting in Bonn, will he resolve not to enter into any scheme, whether proposed at Bremen, Bonn or anywhere else beginning with "B", which involves the principle of fixed exchange rates, which over the past 30 years has done more harm than any other single factor to the economy and morale of this country?

The Prime Minister: I have no intention of entering into any commitments, and nor would one be asked to do so at Bonn, as the right hon. Gentleman knows. There is a great intellectual discussion between the right hon. Gentleman and many others who are similarly profound on the question whether fixed exchange rates have been a problem. I have no doubt that a zone of stability is to be preferred to much of the speculative consequences that flow from the present system. If we could get something between the two, I should be very happy.

Mrs. Castle: When publishing the White Paper on open government to which he referred earlier, will my right hon. Friend bear in mind his Government's manifesto commitment to introduce a freedom of information Act which will place on public authorities the onus of proving why information should be withheld from the public?

The Prime Minister: I have borne that in mind very much and I regret that we cannot come to that conclusion at this time, so the White Paper will contain certain reasons why we shall not be introducing such a Bill.

Mr. Henderson: asked the Prime Minister if he will list his official engagements for Thursday 13th July.

The Prime Minister: I refer the hon. Member to the reply I gave earlier today to my hon. Friend the Member for Lewisham, West (Mr. Price).

Mr. Henderson: As it is possible that the Prime Minister's attention may turn

sometime today to the question of pay policy, will he take into account what many people in Scotland regard as a gross distortion of pay scales, namely, the provision of London weighting, which is now running at about £9 per week, and suggest either the abandonment of this gross favouritism to people working in London or the introduction of a similar weighting allowance for people in areas of high costs, such as Scotland, to bring a sense of equity and fair dealing into pay negotiations?

The Prime Minister: I am aware that the problem of London weighting has often caused a great deal of disagreement throughout many parts of the United Kingdom—not only in Scotland—but it is not an issue for the Government to settle. It is a matter for negotiation.

Mr. Ford: If the Prime Minister, during the course of his engagements today, happens to see the Foreign Secretary, will he congratulate him on the arrangement which has been made in Namibia between the five western Powers and SWAPO and other sections and urge the Foreign Secretary not to brook any interference in the transition to a democratic and peaceful community in Namibia?

The Prime Minister: I am grateful to my hon. Friend, because I believe that the work that has been done by the five Powers in negotiating with South Africa and with SWAPO may be of very great benefit to the people of South-West Africa. It looks as though the five Powers can go to the Security Council to ask for the appointment of a United Nations administrator to effect a peaceful settlement in this territory. That would be of great significance and importance, not only in itself but perhaps for the effects it would have on the prospects of a settlement in Rhodesia as well.

Mrs. Knight: In the light of what the Prime Minister said earlier about ministerial responsibility, may I ask whether he has planned to use any part of his day to call in his right hon. Friend the Minister of State for Overseas Development to try to get agreement on whether the Government are or are not in favour of taking over the 500 top companies in Great Britain?

The Prime Minister: I do not propose to do that today. [HON. MEMBERS: "Answer."] I am sorry that Conservative Members are a little deaf. I said that I do not propose to do that today.

NATIONALISED INDUSTRIES

Mr. Terry Walker: asked the Prime Minister when he last met the heads of nationalised industries.

The Prime Minister: I do not see the heads of nationalised industries collectively, but I meet them individually from time to time, as necessary.

Mr. Walker: Will my right hon. Friend consider having talks with his noble Friend Lord Beswick, chairman of British Aerospace, because there are problems that need to be ironed out about the future production programme of British Aerospace? Many of us on this side of the House welcome the go-ahead for the HS146, but, as the Prime Minister well knows, decisions have to be made about our future collaborative programme with Europe or the Americans and talks with Lord Beswick would certainly help this decision along.

The Prime Minister: I can assure my hon. Friend that the Secretary of State for Industry is in close touch with Lord Beswick on these issues. I welcome the debate that my hon. Friend initiated on Monday. I read it with very great interest and thought that there was a great deal of expert information contained in it which was of help to the Government. We shall reach conclusions on these matters, but negotiations are going on with both European and American aircraft companies.

Mr. Tapsell: Does the Prime Minister's statement made earlier this afternoon that the prices index is going down apply to the products of nationalised industries, or is that statement about to be repudiated, like his earlier assurance to me that the cost of living index would never rise again into double figures?

The Prime Minister: The hon. Gentleman is misleading once more. He forgets the coda with which I ended—namely, provided that we stick with our existing policies. Why does he not quote me in full if he quotes me at all? As for the

retail price index, perhaps the hon. Gentleman will wait until tomorrow to see what figure is published. We shall then know whether the rate of inflation is moving up or down. I have a feeling that, contrary to the national interest but in accordance with their normal prejudices, Opposition Members will be disappointed to find that the rate of inflation is still going down. Whether we can continue to keep it at that level depends upon following the policies that we have enunciated, which I am now struggling to do without any help from the hon. Gentleman.

BUSINESS OF THE HOUSE

Mrs. Thatcher: Will the Leader of the House please state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The business for next week will be as follows:
MONDAY 17TH JULY—Second Allotted Day for consideration of Lords amendments to the Scotland Bill.
Motion on the Appropriation (No. 3) (Northern Ireland) Order.
TUESDAY 18m JULY—Remaining allotted day for consideration of Lords amendments to the Scotland Bill.
Motion supplementing the order of the House of 16th November last relating to the Wales Bill.
WEDNESDAY 19TH JULY—Consideration of Lords amendments to the Wales Bill.
Motion on the Rent (Northern Irleand) Order.
THURSDAY 20TH JULY—Completion of consideration of Lords amendments to the Wales Bill.
Motion on the Education (Northern Ireland) Order.
FRIDAY 21ST JULY—Lords Messages on the Inner Urban Areas Bill, the Independent Broadcasting Authority Bill, and the Community Service by Offenders (Scotland) Bill.
Motions on the Cinematograph Films (Collection of Levy) Order, the Protection of Depositors (Accounts) (Amendment) Regulations, the European Space Agency


Order and the Dominica Termination of Association Order.
Proceedings on the Employment Protection Bill [Lords], and on the Statute Law Repeals Bill [Lords], which are consolidation measures.
MONDAY 24TH JULY—Supply [29th Allotted Day]: The Question will be put on all outstanding Votes.
The subject for debate is to be announced later.
Motion on the dock labour scheme 1978.

Mrs. Thatcher: I put three questions to the right hon. Gentleman. First, on Tuesday's business, I cannot find any precedent for a Government introducing a guillotine motion after midnight, let alone having it apply immediately to business the following day. It is an extremely busy week, to put it mildly. Will the right hon. Gentleman not reconsider the business after midnight on Tuesday so that we may give it our consideration at a more reasonable hour and give it more worthy consideration?
Secondly, there are various indications in the press that there will be a White Paper on pay policy and various other economic matters. Is the right hon. Gentleman able to say when it will be published and when there will be a statement upon it and a debate?
Thirdly, my right hon. and hon. Friends have persistently asked the right hon. Gentleman for a debate on Rhodesia. It is urgent that we have one in Government time before the House rises for the Summer Recess. Will the right hon. Gentleman promise a full day?

Mr. Foot: I do not know whether there is any precedent for a guillotine motion after midnight. However, it is a supplementary motion. It is true that there is a quite extensive amount of business next week. The House has voted that we should carry through some extremely important measures, and we are putting these proposals to the House to ensure that the business is properly concluded.
The right hon. Lady asked about a White Paper on economic affairs. I cannot give her any date, but I expect that such a paper would be published. There would have to be some provision for a debate.
The right hon. Lady has made representations about a debate on Rhodesia. She did so a week ago, and we shall take that into account and seek to provide a day in Government time before the House moves to recess.

Mr. David Steel: In view of the Prime Minister's rather disappointing answer about a White Paper on the Official Secrets Act and a freedom of information Act, will the right hon. Gentleman tell us when the White Paper will be published and whether it will be accompanied by a ministerial statement setting out the Government's conclusions?

Mr. Foot: The White Paper will be a paper setting out the Government's views on the present situation. I do not think that it would be normal to have an accompanying statement to a White Paper of that character. What the right hon. Gentleman and others should do is await the White Paper, when they will know what comments they wish to make.

Mr. Kinnock: Is my right hon. Friend aware that the Wales Bill needs not so much a guillotine but a karate chop? In view of the news of the business this afternoon, does he accept that the inadequacy of the Bill is exceeded only by the indecency of the haste with which it is being pushed through the House?

Mr. Foot: I never knew that my hon. Friend was such an enthusiast for the operations that are conducted in another place. I hope that when the Bill returns to the House we shall have his full support in implementing the views that have already been expressed by the elected House of Commons.

Mrs. Bain: Despite the machinations of the official Opposition and Labour Back Benchers who are opposed to the concept of devolution both to Scotland and to Wales, the Scotland Bill and the Wales Bill are likely to complete their parliamentary stages next week. May we expect an early announcement from the Government on the date of the referendum, which is now the crucial feature of the whole legislation?

Mr. Foot: Let us complete the business that we have announced. As the right hon. Lady the Leader of the Opposition has suggested, the programme is crowded. Let us proceed to complete


that business. When that has been done we may consider how we shall proceed to the next step. I am sure that the whole House is now beginning to recognise that the steps that the Government outlined originally are being carried through.

Mr. du Cann: Is the right hon. Gentleman aware that the attention that he has given in recent months and weeks to Members' remuneration, secretarial allowances and other such matters, in reply to representations made to him by the right hon. Member for Anglesey (Mr. Hughes) and others and myself, is very much appreciated, not least the letter that I received from him within the last hour? For the convenience of the House, will he be good enough to say when he expects to be in a position to make an announcement about percentage increases? If we are to have a debate on these matters before the House rises for the Summer Recess, will he be willing within that short time to comment on the specific proposal made to him, which I believe has full support in the House—namely, that the Top Salaries Review Body should be reconstituted to consider these matters with a view to implementation of any recommendations after the next General Election? Is he able to comment on that matter?

Mr. Foot: I am most grateful for the representations that have been made to me by the right hon. Member for Taunton (Mr. du Cann) and by my right hon. Friend the Member for Anglesey (Mr. Hughes). I believe that those representations are helping the House to approach the whole matter in a manner that will be beneficial in dealing with the whole subject properly. We are today tabling motions and resolutions on the Order Paper on these issues. I do not think that it is necessary for any announcement to be made about that in the House. We shall have a debate on the motions and resolutions before we depart for the recess. The House will be able to give its opinion. During the course of the debate, I shall make some response to the requests that have been made to comment on the possibility of the re-establishment of the Top Salaries Review Body and how we might proceed along those lines.

Mr. Spearing: Does my right hon. Friend recall that on 28th November he gave an undertaking to table a motion

relating to the procedures of the House in controlling the response of Ministers to proposals for Brussels legislation? Is he able to tell the House whether that debate will take place before the Summer Recess? Will he give an indication when he expects to table such a motion on the remaining Orders of the Day?

Mr. Foot: I cannot give my hon. Friend an exact date, but I can assure him and the others who are concerned that I am fully aware of the commitments that I made in November, that arose from earlier commitments that had been made to the House. I am aware of what was said, and I hope that we shall deal with the matter before the House goes into recess.

Mr. Pym: Will the right hon. Gentleman reconsider the arrangements that he has announced for next week? Why cannot he take the timetable motion on Wednesday and take the last day of the Wales Bill on the first day, or on one other day, of the following week? There is not such a degree of urgency in achieving the objective of completing the Bill in the manner that he has described. Why cannot we do it at a more reasonable speed?
Will he give the House some indication of the number and range of statements that he expects to be made between now and the time that we rise? It is a time of the year when there is apt to be many statements. When we contemplate a week such as next week, as the right hon. Gentleman now has arranged, that could be inconvenient to the House. Is he prepared to give some indication of the number and range of statements that are likely to be made?

Mr. Foot: No one has greater experience than the right hon. Gentleman on the difficulty that may arise towards the end of a Session about the numbers of statements that have to be made. Although we seek to ensure as best we can that the debating time of the House is protected, there are bound to be occasions when statements called for by either the Opposition or the rest of the House have to be made. We do our best to try to arrange such matters successfully.
As for rearranging the business for next week, if the Opposition wish to take their Supply Day earlier, we might be able to look at it in that sense. I should have


thought that what we have proposed was the best way to proceed. Of course, if the right hon. Gentleman would give us an absolute assurance that no other suggestions will be coming from another place—I know how powerful his influence is there—that might help us to arrange the business, too. If he cannot assist us in either of those directions, I think that we should proceed with the arrangements that we have already made.

Mr. Greville Janner: Will there be a debate on human rights before the House rises, as presaged by the Foreign Secretary in his statement to the House earlier this week?

Mr. Foot: I cannot promise a debate, although the importance of the matter is very great. There are other opportunities, as my hon. and learned Friend knows, for individual Members to raise important questions for debate before we depart for the Summer Recess.

Sir David Renton: I remind the right hon. Gentleman that he welcomed my suggestion that, before we reached a conclusion on the timetable motion on the Scotland Bill, the Government should declare their intentions with regard to Lords amendments. That was not done in relation to the Scotland Bill. Will he ensure that it is done in relation to the Wales Bill?
Secondly, does he recollect a time when, even in July and even under this Government, we have been so overloaded with business that we have had to take a timetable motion after midnight?

Mr. Foot: On the first question raised by the right hon. and learned Gentleman, I must say that his response is a little ungenerous because, partly as a result of the question that he put to me, we took steps to indicate to the House the general numbers of amendments or resolutions that the Government intended to accept. I believe that the House generally has been assisted by the way in which we have approached the matter. Certainly that has been the response that I have had from many Opposition Members. I believe that the same procedure can be adopted for dealing with the Wales Bill. In many respects we are going further than has normally been the case with

any Government when dealing with such a measure.
As for the crowded programme, it is and often has been the case on previous occasions for there to be a great deal of business for the House to get through before the end of July. But the House of Commons decided that these major matters of constitutional importance should be proceeded with in the votes both on Second Reading and on establishing the timetable motions. Therefore, the House itself having urged that we should proceed, I believe that we must bring those great measures to a proper conclusion.

Mr. Skinner: Will the Leader of the House indicate whether there will be a debate before the recess—whether next week or some other time—regarding the Roy Jenkins model for European monetary union? Is he aware that, unlike the Prime Minister, many of us regard this not as an intellectual exercise but as another part of the political hand-over to Brussels? When combined with the Common Market elections next year—if they take place—it may be that before an election in this country we shall be placed in a similar position to that of 1970 when the two sides of the House were not quite clear on the details. The result was that that lot—the Tory Party—got in and we got embedded in Europe. We do not want that to happen again.

Mr. Foot: I agree with my hon. Friend that we must take every precaution to ensure that "that lot" do not get in again. I am sure that we shall all work together to ensure that that is the case.
The other matters raised by my hon. Friend will, of course, be debated in the country and in the House for a considerable number of months ahead—indeed, even longer.

Sir Raymond Gower: As the operation of the two guillotines hampered proper discussion of parts of the two devolution Bills and as the Lords have rightly thrown them back at us so that we may have a second chance to discuss those parts adequately, will the right hon. Gentleman ensure that, at the conclusion of the discussions, we shall have given some attention to the parts that could not be discussed the first time?

Mr. Foot: We are doing everything in our power to ensure that the House shall have the best opportunity in the time available to have the fullest possible discussion, particularly of those aspects of the Bills that were not fully discussed before. There are some aspects of those measures on which the House of Lords has taken a different view from the House of Commons, so clearly further provision must be made for those matters to be debated here. The debate on the Scotland Bill a few days ago showed the spirit in which the Government were approaching the matter, and I believe that every hon. Member present during the debate could see the spirit in which the Government were dealing with it.

Mr. Dalyell: In view of the evidence of Sir Stanley Raymond and Lord Allen as successive chairmen of the Gaming Board to the Royal Commission on gambling to the effect that the devolution of betting and gaming would be "highly dangerous" and in view of the fact that it is unlikely that betting will be reached because of the slotting of the guillotine, is it not important that this subject should be fully discussed before any decision is reached?

Mr. Foot: We may not need to have such a full discussion, because we might possibly agree with the suggestions that have come from those quarters. That might assist the debates on other matters as well. However, as my hon. Friend knows, we have not quite reached that point on the Bill.

Mr. Peter Mills: As British agriculture is totally in the dark as regards what is required in future production, when may we have a statement from the Minister of Agriculture on updating "Food from Our Own Resources"? Surely the Leader of the House realises that that is in the interests of the consumer as well.

Mr. Foot: I think that it is well understood throughout the country—it is certainly understood by most hon. Members—that we have an excellent Minister of Agriculture. On every occasion that he has made a statement to the House, I think that has been acknowledged by everybody, except possibly the Opposition Front Bench. I am not sure whether there should be a further statement on these

matters before the House goes into recess. I shall certainly take the representations into account. I have also to take into account the representations made by the Opposition Front Bench that we should not have too many statements.

Mr. Molloy: In view of the terrible accident in Spain earlier in the week resulting in such tragic deaths, the primary cause being one lorry possibly on the wrong road, ought not the House now to debate all safety measures relating to lorries travelling on our roads so that we can be certain that lorries transporting hazardous consignments are properly managed and maintained and that the routes they take are supervised to ensure the minimum amount of danger in this island? We cannot wait for an accident to happen before having an inquiry. Is it not time that we had a full inquiry to ensure that the terrible tragedy that took place in Spain does not happen in this island?

Mr. Foot: I fully accept what my hon. Friend said about the great importance of this subject. I am not seeking to minimise it in any sense whatsoever. Whether the best thing is to have a debate in the House on the matter is another question. The time available for debates is severely restricted. However, that does not in any way minimise the importance of trying to draw every possible lesson that we can from the appalling tragedy that occurred.

Sir Bernard Braine: Bearing in mind that I wrote to the Prime Minister 17 days ago, after the Health and Safety Commission report had clearly established that Canvey Island was the most endangered community in this country, begging him to intervene, will the Leader of the House arrange for the Prime Minister to make a statement next week or, better still, will he agree to the reasonable plea made by the hon. Member for Ealing, North (Mr. Molloy) for this grave matter here on our own doorstep to be debated before something very serious occurs?

Mr. Foot: I fully accept what the hon. Gentleman said about the seriousness of the matter. I understand that the Secretary of State for Transport has already initiated inquiries and investigations into the matter. But it is not possible to arrange to have statements on


all the subjects that hon. Members raise. If we did, we would not have any time for the other debates that hon. Members also demand. We have to take that matter into account as well. I repeat, I am not seeking in any sense to minimise the importance of the subject that has been raised.

Dr. M. S. Miller: I pay tribute to my right hon. Friend's interest in the medical surveillance of hon. Members. When will he be in a position to make a statement about this important matter?

Mr. Foot: I hope that there will be a statement soon. The Services Committee has considered the matter. We are all grateful to my hon. Friend the Member for East Kilbride (Dr. Miller) and his associate from the Opposition I or the evidence that they have given us on this matter. I hope that before we depart for the recess it will be possible for Mr. Speaker to make a statement.

Mr. Cormack: Shall we complete all the outstanding business before the recess? If so, when do we expect to rise for the recess?

Mr. Foot: I cannot give the date yet. It depends upon the degree of co-operation. I am glad to see the hon. Member for Staffordshire, South-West (Mr. Cormack) in such a co-operative mood.

Mr. Loyden: Is the Leader of the House aware of the growing concern about the Health Service? Does he agree that the value of the Health Service and the benefit that it has brought to the community proves that the Service is well worth defending? In view of the erosion in certain areas of the Health Service will he arrange for a debate, if not next week, before the recess so that we can hear from the Secretary of State about the measures that he has taken to overcome the difficulties?

Mr. Foot: Once again I must say to my hon. Friend, as I have said to others, that although there is no possibility of a full day's debate on this subject, that does not mean that I think that the subject is not extremely important. There are other opportunities for hon. Members to raise matters before the House departs. A considerable amount of time is allocated to hon. Members and the

Opposition to choose subjects for debate. I cannot promise a full day's debate in Government time, even though the subject is so important.

Mr. Fairbairn: In view of the obscene inquisitions in Russia in defiance of all the principles of our civilisation, and to challenge our defence of them, will the Leader of the House arrange a foreign affairs debate so that the genuine reaction of all sides of the House can be registered?

Mr. Foot: The views of the Foreign Secretary, the Government and the House have been expressed already in many statements in recent weeks and days. It is not necessary to have a debate for the House to express its views.

Mr. Litterick: Since we have a fair amount of time available to us between now and October, will the Leader of the House take note of the widespread distress now being felt by readers of women's magazines who have discovered that the laws governing the Royal succession are at odds with the Sex Discrimination Act since those laws deprive the female members of the Royal Family of their rightful place in the queue? Will the Government devote their mind to this serious subject?

Mr. Foot: I am prepared to devote my mind to the subject but I cannot promise any legislation.

Mr. Rees-Davies: May we have an assurance that before the House rises for the recess we shall have an opportunity to debate the Royal Commission on gambling, bearing in mind certain aspects of it? There are a number of extremely urgent recommendations for lotteries, competitions and racing. Is the Leader of the House aware that these matters greatly affect many citizens who are anxious that the report should not be put to bed and left to sleep but that we should have an opportunity now of expressing a view before we have a general election? If it were left it might be some time before an opportunity to discuss the matter arose.

Mr. Foot: The Government set up the Royal Commission because they believed that certain matters should be investigated. I cannot promise a debate before the recess, for the reasons that I gave to other questioners. I am afraid that both


the hon. Member and other hon. Members must recognise that a limited amount of time is available.

Mr. Ron Thomas: I hope that the Health and Safety Commission will issue an urgent report but may I put a different question to the Leader of the House? Does the Leader of the Opposition have some kind of constitutional prerogative which allows her to put as many questions as she likes to the Prime Minister? If that is so—

Mr. Speaker: Order. Was the hon. Member seeking to criticise a ruling that I have made?—[HON. MEMBERS: "Yes."] He knows well enough that that is not the way to do it. There is an established way for him to do that. I shall not sit in this Chair whilst he stands up and makes any charge that he likes.

Mr. Costain: Has the Leader of the House read the letter that I sent to him yesterday pointing out that 64 hon. Members attended the south-east study Committee for a two-and-a-half hour debate? Will he allow an extra day for that debate?

Mr. Foot: I shall look at the matter. I should be prepared to recommend that fresh time be given for that debate.

Mr. Burden: May I draw the right hon. Gentleman's attention to Early-Day Motion No. 445 which is supported by hon. Members of all parties and which is now signed by 223 hon. Members? Is the Leader of the House aware that the motion calls for a debate on the report on the export of live animals for slaughter and further fattening? Is he aware that new regulations are being issued in Europe in August? Does he agree that there should be a debate so that the Minister of Agriculture, Fisheries and Food can come to the House and explain what those regulations are and so that the House can have an opportunity of expressing its view?

[That this House considers that the contents of the report by agriculture departments of the Ministry of Agriculture, Fisheries and Food that was issued in March 1978 under the title, 'The Export Trade in Live Animals for Slaughter or Further Fattening' are of great interest and concern to honourable Members of this House, to animal welfare organisations, the farming industry and

the general public; and asks Her Majesty's Government to set aside time for an early debate.]

Mr. Foot: The Government recognise the strength of feeling in all parts of the House about this trade. That is why my right hon. Friend set up the recent inquiry and decided to publish the report. Discussions have been taking place between representatives of the welfare interests and the producers and exporters. It would be best to await the outcome of those discussions before having a debate.

Several Hon. Members: rose—

Mr. Speaker: I propose to call those hon. Members who have been standing so far.

Mr. Bowden: Is the Leader of the House aware that there is considerable anger on both sides of the House about the lack of discussion on the Floor of the House about the problems of London and the south-east? Will the Leader of the House please make time so that we can discuss this region in the House because my constituents are sick and tired of the time that we have wasted on Wales and Scotland?

Mr. Skinner: That is a good reason for voting for the guillotine.

Mr. Foot: My hon. Friend says that that is a good reason for voting for the guillotine. I am pleased to have made such a rapid convert. I understand the desire to discuss these matters in the House. Some of these matters were discussed during the passage of the Inner Urban Areas Bill. Some time has been spent discussing that measure and many of the problems of the south-east were raised during the passage of that Bill.

Mr. Faulds: Does my right hon. Friend think that it might help the House with the problem of the Leader of the Opposition and her three bites at the cherry if, by special dispensation, the fellow who prepares the Questions for her were allowed to sit beside her so that he can explain not only the Answers but the original Question?

Mr. Adley: Does the Lord President recall that on a number of occasions I have made representations to him and his colleagues about the lack of opportunity to discuss the fundamental changes which


the Scotland Bill makes to the constitution of the British Tourist Authority? Is he aware that the Government's proposal will put political placemen in a position of supremacy in dictating policy?
Is he further aware that the recent appointment as the new chairman of the Wales Tourist Board of a thrice-failed Labour candidate—however nice a chap he might be—has not allayed any of the fears? The Leader of the House told us a few weeks ago that he wished to abolish the House of Lords. Is he now saying that he is satisfied that this important matter, which affects the whole of the United Kingdom, should be discussed only in the other place?

Mr. Foot: There could have been a discussion in the House of Commons on the matter if the hon. Gentleman and some of his hon. Friends had wished and had arranged their contributions in a somewhat different manner. I do not think, therefore, that that criticism comes so well from him. I gather that some discussion has taken place on this matter in another place, and that, too, affects the situation.
The House is fully aware that if we were to provide endless time for discussion on the changes made to the Bill in another place, the Bill would never get on to the statute book. I understand that some Conservative right hon. and hon. Members, including the right hon. Member for Cambridgeshire (Mr. Pym) want that, but that is not what we want and it is not what the House of Commons, let alone the House of Lords, has voted for.

Several Hon. Members: rose—

Mr. Speaker: May I appeal to hon. Members to help me by putting short questions?

Mr. MacKay: Is it not time that we had a statement from the Edmund-Davies report on police pay, particularly since the Home Secretary, sitting on the Treasury Bench last week, was waving the report over his head with some panache?

Mr. Foot: I hope that there will be a statement on that important subject in the House next week.

Dr. Hampson: Is the Lord President aware of the serious accusation made by

some of the press against the Secretary of State for Education that she ordered the destruction of and engaged in a cover up about the existence of a report by her inspectors of 10 bad schools at a time when she was publishing a report on 10 good schools? Does the right hon. Lady not owe it to the House and to herself to give a clear, open explanation, which we have certainly not had from her Department so far?

Mr. Foot: I do not know in which section of the press that absurd charge was made against my right hon. Friend. I am sure, however, that it will be dismissed by all hon. Members in the proper way.

Mr. David Atkinson: Is the Lord President aware of the continued non-publication of the Official Report for 12th, 13th, 14th, 17th, 18th and 19th April? Is he aware that this includes the record of the first few days of the Budget debate? Can he assure the House that it will be published before the recess?

Mr. Foot: I am hoping to overcome those difficulties. I am extremely sorry that such a trouble should have arisen.

Mr. Budgen: Will the Lord President confirm that there is now no opportunity before October for what might have been only the third general debate on the vital subject of immigration?

Mr. Foot: There is one Supply Day left.

Mr. Gow: Is it possible for the Government to publish, even though they might not be able to find time to debate, the Bill to give effect to the recommendations of the Speaker's Conference for increased representation in Northern Ireland?

Mr. Foot: I have answered hon. Members and others on that subject before. I have nothing to add today to what I have said earlier.

Mr. Arthur Latham: On a point of order, Mr. Speaker. I should be most grateful for some guidance. With a number of my hon. Friends I am a little worried about what happened toward the end of questions on the Business Statement. You will recall that my hon. Friend the Member for Warley, East (Mr.


Faulds) who is both louder and bigger than my hon. Friend the Member for Bristol, North-West (Mr. Thomas)—

Mr. Faulds: And nicer.

Mr. Latham: —referred to a particular matter concerning three bites of the cherry. I am sure that my hon. Friend the Member for Bristol, North-West intended you no discourtesy. Perhaps his language should have been more felicitous. We have been discussing among ourselves which ruling you felt my hon. Friend the Member for Bristol, North-West was in breach of. We were wondering, too, whether there is any way in which we may subsequently address questions to you or to the Lord President when it seems that the Leader of the Opposition is taking a quite disproportionate share of Question Time and is excluding many Back Benchers.

Mr. Speaker: I asked the hon. Member for Bristol, North-West (Mr. Thomas) whether he was challenging the ruling I had made. He did not answer. I then called the next hon. Member to speak. On the question of the Leader of the Opposition being called three times at Question Time, I have had research done. It shows that this is by no means the first Parliament in which the Leader of the Opposition has been treated in that way. If hon. Members look into the records they will see that when both parties have been in Opposition their leaders have exercised, and have been given, the same discretion.

Mr. Adley: Further to that point of order, Mr. Speaker. Last week during Prime Minister's Questions you indicated to Labour Members that it was not the responsibility of the Prime Minister to answer questions about the activities of the Leader of the Opposition or Conservative Members. Will you reconvey those views to the Prime Minister, who seems to utilise the occasion to answer questions from his own Back Benchers if it suits him but to refuse to answer questions put by my right hon. Friend the Leader of the Opposition?

Mr. Speaker: Order. I fear that that is an old custom of this House. No intervention from me can have anything to do with that. It is not for me to direct the content of replies.

Mr. Faulds: Further to the point of order, Mr. Speaker. I accept that you

have done research in this matter and have found that under previous Administrations the Leader of the Opposition has been allowed three bites of the cherry. There seem, however, to be two new factors in this situation. The first concerns the unfortunate continuation of the broadcast time. The second factor—and perhaps you can confirm this, Mr. Speaker—is that under previous Administrations the Leader of the Opposition added supplementary questions that extended the argument. The current Leader of the Opposition merely reiterates the old porridge time and again.

Mr. Speaker: Order. I think that we can leave this matter now and turn to the Standing Order No. 9 application.

SOCIAL SECURITY OFFICES (CLOSURE)

Mr. Lawrence: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the continuing closure of the unemployment benefit and Department of Health and Social Security offices in Burton-upon-Trent and elsewhere.
The matter is specific in that it concerns official strike action now being taken by clerical staff members of the Civil and Public Services Association at the unemployment benefit office in Burton-upon-Trent and in 13 other targeted towns and cities in Britain.
The DHSS office clerical staff has come out in sympathy without going through the established union procedures, and that means that no unemployment, sickness or supplementary benefit of any kind has been paid out by these offices in the last four days.
The matter is important both because it raises a matter of vital constitutional significance and because it is causing substantial human distress. The dispute is not about wages or the threat of redundancy. The Minister has made it clear that there will be no redundancies as a result of the scheme that is being discussed. It is about whether the new leadership of a powerful union, a leadership consisting of Left-wing militants—and that is because thousands of moderate


civil servants could not stir themselves from their apathy long enough to vote in the elections—can so lean on a Labour or any Government as to force them to change their policy decisions.
The matter is important to the House because this union, with an utterly callous disregard for the misery it might cause, has chosen as its victims in this struggle tens of thousands of the unemployed, the sick and disabled—the weakest people in our society.
The matter is urgent because 2,000 people in Burton and 30,000 in the rest of the country may not receive enough money to live on this week. Furthermore, there is expected to be some violent reaction at the offices concerned, and I have just heard that the Burton branch has voted unanimously to stay out indefinitely. The likely effect of that, if the Government are not forced to back down to avoid confrontation, is positively frightening.

Mr. Speaker: The hon. Member for Burton (Mr. Lawrence) gave me notice this morning that he would seek, under Standing Order No. 9, to draw attention to a specific and important matter which he thought should have urgent consideration and on which he would seek to move the Adjournment of the House, namely,
the continuing closure of the unemployment benefit and Department of Health and Social

Security offices in Burton-upon-Trent and elsewhere.
I listened carefully to what the hon. Gentleman said and I have no doubt—nor, I am sure, will the House have any doubt—that he has drawn attention to a serious matter. I have to decide whether the business of the day is to be changed, tonight or on Monday night next. As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the Order but to give no reasons for my decision. I am afraid that I cannot rule that the hon. Member's submission falls within the provisions of the Standing Order and therefore I cannot submit his application to the House.

STATUTORY INSTRUMENTS, &c.

Mr. Speaker: By leave of the House, I will put together the Questions on the three motions relating to Statutory Instruments.

Ordered,
That the draft Shipbuilding (Redundancy Payments Scheme) (Great Britain) Order 1978 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the draft Shipbuilding (Redundancy Payments Scheme) (Northern Ireland) Order 1978 be referred to a Standing Committee on Statutory Instruments, &amp;c.
That the Health and Safety (Genetic Manipulation) Regulations 1978 (S.I., 1978, No. 752) be referred to a Standing Committee on Statutory Instruments, &amp;c.—[Mr. Foot.]

Orders of the Day — FINANCE BILL

As amended (in the Committee and in the Standing Committee), further considered.

Clause 30

CLOSE COMPANIES: RELEVANT INCOME OF TRADING COMPANIES

4.11 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): I beg to move amendment no. 12, in page 22, line 8, at end insert—
'(2) In paragraph 9(4) of that Schedule (associated company to be disregarded for purposes of paragraph 9(3)) for the words "which has not carried on any trade or business at any time in that accounting period" there shall be substituted the words "which was not a trading company, or has not carried on any trade, at any time in that accounting period".
(3) In paragraph 10(3)(b) of that Schedule (calculation of distributable investment income) for "£500" there shall be substituted "£1,000".'.
This amendment gives effect to two undertakings given in Committee by my right hon. Friend the Chief Secretary. The new subsection (2) fulfils the purpose of amendment no. 478 moved in Committee by the hon. Member for Gloucestershire, South (Mr. Cope) to exclude the company which is not a trading company from counting as an associated company and therefore from reducing the limits below which the estate or trading income of the trading company with which it is associated is disregarded or abated for apportionment purposes. The new subsection (3) is on the lines of the second half of the same hon. Member's amendment no. 89 also moved in Committee. The figure is £1,000 as my right hon. Friend said it would be.

Amendment agreed to.

Clause 31

CLOSE COMPANIES: ACQUISITION OF TRADES

Mr. Denzil Davies: I beg to move amendment no. 136, in page 22, line 16, at end insert—

'or of an interest in a trading company or in a company which is a member of a trading group'.

Mr. Speaker: I understand that it will be convenient to discuss at the same time Government amendments nos. 137 to 145 and 148 to 153.

Mr. Davies: Amendments nos. 146 and 147, which are in this list, come later on the Amendment Paper but they come with this group, as they all relate to schedule 5. Perhaps I might therefore deal with all of them together.
This group of amendments fulfils three undertakings which Ministers gave in Committee—the first to change and the other two to clarify the intention of the new apportionment rules about acquisition of trades. The amendments to lines 40 and 41 on page 68 restrict those who can count as associates for the purpose of the control tests used in deciding whether companies are associated. As the Bill is drafted, children or "remoter issue" of directors of the company being considered count as associates. Under the amendments, they will count only if they are infants at the relevant time.
I also said in Committee that I would see whether it was preferable to put into legislation the intention to apply the wording "acquisition of a trade" to the acquisition not of the trade itself but, as so often happens, of control of the company carrying on the trade. The amendments also fulfil that undertaking.
The amendments also deal with first business loans and with various technical matters relating to paragraph 8 of schedule 16 of the Finance Act 1972.

Mr. Peter Rees: We welcome the amendments and we are grateful to the Minister of State for having been so open-minded on the question. We are glad that he has adopted the suggestions that we made in Committee.

Amendment agreed to.

4.15 p.m.

Mr. Graham Page: I beg to move amendment no. 190, in page 22, line 19, at end insert
'irrespective of whether the acquisition takes place before or after that date'.
Clause 31 introduces new rules for ascertaining the relevant income of close


companies—a technical phrase but something of vital importance to small companies, such as family companies, which are small in the number of members that they may have. Part II of schedule 16 of the Finance Act 1972, which is mentioned in the first line of clause 31, lays out the rules for charging to income tax in respect of shortfall and distributions of close companies and the apportionment to participators.
To put it briefly, if more than half the income can be apportioned between five or fewer participators, it is charged to tax, as it were in the hands of those participators, even though not distributed. Therefore, it is important to ascertain what is the relevant income which must be assumed in that way to be distributed or to be available for distribution.
In determining the relevant income, the new provisions inserted by clause 31 say that one can take into account the requirements of the company for the acquisition of a trade. That is very welcome as an extension of the relief given to close companies which are expanding and purchasing new businesses.
One assumes from this that the purchase price of a new business or of equipping the premises of a new business with, for example, plant, or the use of working capital for a new business, will in future be deductible from the income in order to reach the relevant income which may be assumed to be apportioned among the participators.
Subsection (2) says that this new relief will have effect
…with respect to accounting periods end-on or after 11th April 1978.
There is considerable doubt about the effect of that when is speaks of "accounting periods" and of taking into account
…the requirements of a company for the acquisition of a trade.
The doubt arises on the question whether that refers to the acquisition of a new trade by the close company before 11th April 1978 as well as afterwards.
An example is the case in which the business has been acquired before the 1977–78 accounting period—perhaps in the period 1976–77—and is being paid for by instalments. One hopes that the clause is clear enough and that those instalments can be brought into account and receive

the relief given under clause 31, but it does not seem certain that that is so.
I therefore seek to make this matter clear with the amendment by adding the words
irrespective of whether the acquisition takes place before or after that date
at the end of subsection (2).

Mr. Denzil Davies: The right hon. Gentleman seeks in this amendment to clarify—as he sees it—the present provisions. My brief says "Resist as unnecessary." It is the Inland Revenue's view that the position is clear and that the amendment is not necessary. However, as the right hon. Gentleman puts his points so reasonably and as—as far as I can see—the amendment will do no harm and might make the position clear to those who feel that it is not clear, I am happy to accept it.

Amendment agreed to.

Schedule 5

RELEVANT INCOME OF CLOSE COMPANIES—AMENDMENTS OF FINANCE ACT 1972, SCHEDULE 16, PART II

Amendments made:

No. 137, in page 67, leave out lines 26 to 34 and insert—

(3) In arriving at the relevant income for any accounting period of a company which is a trading company or a member of a trading group, regard shall be had not only to the current requirements of the company's business and to such requirements necessary or advisable for the maintenance or development of that business as fall within sub-paragraph (2)(a) above, but also to any other requirements necessary or advisable for the acquisition of a trade or of a controlling interest in a trading company or in a company which is a member of a trading group by virtue of paragraph 11(2)(a) below; but for this purpose paragraph 12A below shall apply.

(4) For the purposes of sub-paragraph (3) above, the acquisition of a controlling interest in a company means the acquisition, whether on a single occasion or otherwise, of such ordinary share capital of that company as enables the acquiring company to exercise the greater part of the voting power in that company

(5) For the purposes of sub-paragraph (3) above the requirements of a company's business which are necessary or advisable for such an acquisition as is mentioned in that subparagraph include such requirements as are necesary or advisable for—



(a) the redemption or repayment of any share or loan capital or debt (including any premium thereon) issued or incurred in or towards payment for that acquisition, or issued or incurred for the purpose of raising money to be applied in or towards payment therefor, or
(b) meeting any obligations of the company in respect of that acquisition,

so far as any sum so expended or applied, or intended to be expended or applied, does not fall to be treated for the purposes of this Schedule as a distribution by the company.'

No. 138, in line 35, leave out from beginning to 'above' and insert—
'2. After paragraph 12 of Schedule 16 to the Finance Act 1972 there shall be inserted the following paragraph—
12A.—(1) Paragraph 8(3)".'.

No. 139, in line 48, leave out 'subparagraph (3)' and insert 'paragraph 8(3)'.

No. 140, in line 49, at end insert—
'(2) Paragraph 8(3) above shall not apply to—

(a) the acquisition of shares which at the date of the acquisition or at any time within one year previously were owned by an associated company of the acquiring company or by a person who then had control of the acquiring company; or
(b) the intended acquisition of shares which at the end of the accounting period for which the acquiring company's relevant Income is to be ascertained are owned by a company which is then an associated company of the acquiring company or by a person who has control of the acquiring company;

and where shares were, or are, in part owned as mentioned above, paragraph 8(3) above shall nol apply with respect to that part.

(3) Paragraph 8(3) above shall not apply to—

(a) the acquisition of shares in a company which immediately before the acquisition or at any time within one year previously was an associated company of the acquiring company; or
(b) the intended acquisition of shares in a company which, at the end of the accounting period for which the acquiring company's relevant income is to be ascertained, is an associated company of the acquiring company.'.

No. 141, in page 68, line 4, leave out sub-paragraph (4)' and insert 'subparagraphs (1), (2) and (3)'.

No. 142, in line 5, leave out 'that subparagraph' and insert 'each of those subparagraphs'.

No. 143, in line 8, leave out 'subparagraph (4)' and insert 'sub-paragraphs (1), (2) and (3)'.

No. 144, in line 19, leave out 'subparagraph' and insert 'sub-paragraphs (2) and'.

No. 145, in line 21, leave out subparagraph '(4)(b)' and insert
paragraph (b) of sub-paragraphs (1), (2) and (3)'.

No. 146, in line 40, at end insert 'any'.

No. 147, in line 41, after 'issue', insert 'who is an infant'.

No. 148, in line 48, leave out 'sub-paragraphs (4) and (6) above' and insert 'this paragraph'.

No. 149, in line 49, leave out 'which is' and insert', or shares'.

No. 150, in page 69, line 4, leave out from 'asset' to 'conveyed' in line 5 and insert
'interest or shares is or are'.

No. 151, in line 6, leave out from beginning to 'above' in line 10 and insert—
'(8) For the purposes of sub-paragraph (3) of paragraph 8'.

No. 152, in line 14, leave out 'the acquisition of a trade' and insert
'such an acquisition as is mentioned in that sub-paragraph'.

No. 153, in line 16, leave out 'above' and insert
'of paragraph 12 above; and sub-paragraphs (2) and (3) of that paragraph shall apply for the purposes of this sub-paragraph as they apply for the purposes of that paragraph'.-[Mr. Denzil Davies.]

Clause 32

CAPITAL ALLOWANCES: LONG LEASES

Mr. Graham Page: I beg to move amendment no. 181, in page 22, line 43, leave out from 'within' to 'and' in line 44 and insert:
'three years after the date upon which the original lessee was first entitled to possession under the lease'.
The clause deals with capital allowances and particularly their allocation where there are long leases. The basis of the granting of capital allowances for building or structure is that they are granted to the person holding the relevant interest, which is defined in chapter I of part I of the Capital Allowances Act 1968.
It often occurs—indeed, I know of instances—that the lessee under a proposed long lease carries out some of the


work which would attract the capital allowances. It is doubtful in those circumstances whether it is the lessee or the lessor who is entitled to take the grant. This is particularly important, perhaps, if the lessor is not entitled to claim it, because of a particular status of the lessor. Therefore, the clause, which gives an election whether the relevant interest shall be treated as being in the lessor or the lessee, is a very valuable relief to those concerned with the grant of long leases which involve building and structure.
The matter is set in motion by an election by the two parties concerned as to who shall have the benefit of the allowance. As we have seen time and time again in the provisions of the Bill and in other taxation matters, an election must be made in a certain time. Subsection (3) says:
Any election under this section shall be by notice in writing to the inspector given within two years after the date on which the lease takes effect".
In Committee we briefly discussed the two points which arise in that phrase. The first is the time within which the election is to be made—as it is provided here, a period of two years—and the time at which it is to start to take effect. Here it is said:
the date on which the lease takes effect".
In Committee my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) raised the question as to what is the date when a lease takes effect. There certainly is some doubt about that.
I should like first to return to the timing. Normally, such transactions are fairly complicated where there may be agreements for building lease and negotiations throughout, perhaps, the commencement of the building between the two parties. A period of two years may go by pretty quickly when large construction is concerned. Therefore, I should have liked to see a full period of six years, but, appreciating that it is important in such cases to get a settlement of the matter as soon as possible and to know who is entitled to these capital allowances, I have suggested in the amendment that a compromise would be three years. I think that that little extra bit from the two years to the three years when construction is going on, when there

are negotiations over the terms of a lease and so on, is a reasonable period.
But from when is the lease to start? I believe that the words:
the date on which the lease takes effect
have little meaning in law. I do not know when a lease takes effect. I do not know whether it is the date of the lease, although nobody takes possession for perhaps months after that. Sometimes leases are dated back before there is any intention of possession being given and the lessee enjoying the lease, the date being inserted merely in order to fix the term of the lease.
I should have thought that the reasonable thing here is to identify the date, as I have endeavoured to do in the amendment, by saying that it shall be
the date upon which the original lessee was first entitled to possession under the lease".
Undoubtedly there will be provision within a long lease of this sort for the taking of possession. It may well be on the completion of the building or some such date. That is the point from which time should be given for making the election. Therefore, in place of the words of the subsection which I read out just now I seek to insert as the period for the election:
three years after the date upon which the original lessee was first entitled to possession under the lease

Mr. Denzil Davies: The right hon. Member for Crosby (Mr. Page) raised this matter in Committee. There are two points in his amendment. First he seeks to extend the time for election from two years to three years. In Committee he sought to extend it to four, but he has now come down to three, no doubt hoping that I would meet him.
I still stand by what I said in Committee. I think that two years is a reasonable time. We have considered the matter, and I cannot see that there would be any case of hardship. I think that a two-year limit, which I am told is the normal limit in such cases, is reasonable and should stay.
The right hon. Gentleman's second point concerned the meaning of the words in the clause:
the date on which the lease takes effect".
He sought, as he would argue, to clarify that phrase by changing the wording. The


right hon. Gentleman's wording is all right. The difficulty is that I understand that similar words to those in the clause already appear in the Law of Property Act 1925. There is, as I wrote to the right hon. Gentleman, some authority as to the meaning of those words. Therefore, we are dealing with a set of words which is not unknown in law, and I do not think that normally there would be much of a problem as to when a particular lease takes effect.
The other difficulty is that both subsection (1) and subsection (8) are drafted on the basis of the original wording. Therefore, if we were to accept the right hon. Gentleman's wording for part of the clause it would look very odd, and we should have to recast the clause.
But my main argument is that the words chosen have been used in law and have been pronounced upon by the courts. In these matters involving property it is probably sensible to stick to hallowed words. New words, however good they might appear, generally tend to create confusion in property matters.
We shall certainly watch the matter in the course of the year, if that will help the right hon. Gentleman, and if there are difficulties they can be put right. But I cannot accept the amendment.

4.30 p.m.

Mr. Graham Page: I am grateful to the Minister for agreeing to look at this matter again. We have already discussed it in Committee. I regret that it is not sufficient for our purposes today for the Minister to undertake to examine the question in the future. The one substantial point which he made was that these

words are used elsewhere in the clause and that to use them in this subsection might be confusiong. This subsection deals merely with the date for election, the date from which time will run for election. There would, therefore, be no confusion.

The Minister also said that these words were used in the Law of Property Act. I do not wish them to have the meaning which they have in that Act. I want the time to start from the time when the lessee is entitled to possession. I have come to the conclusion in these debates that it is absolutely necessary to spell out exactly what the Bill seeks to do or what we think it intends to do—what we on the Opposition Benches wish it to do. If we do not spell out exactly what we mean there may be unforeseen results. The Minister has said that he is advised that the words mean this or that.

The Chancellor of the Exchequer was advised that certain words meant certain things in the case of the scholarships which arose two years ago. He administered the law for two years. Suddenly new advice was given and everything was changed. This is what happens if we do not put a few extra words into the Bill spelling out exactly what is required. In this case we do not need to have the position cleared up. Large sums of money are involved. This is no small matter. On the basis that we ought to spell out in the Bill exactly what we intend I hope that my right hon. and hon. Friends will join me in the Lobby.

Question put, That the amendment be made:—

The House divided: Ayes 231, Noes 259.

Division No. 266]
AYES
4.32 p.m.


Adley, Robert
Brocklebank-Fowler, C.
Dean, Paul (N Somerset)


Amery, Rt Hon Julian
Brooke, Hon Peter
Dodsworth, Geoffrey


Atkins, Rt Hon H. (Spelthorne)
Brotherton, Michael
Douglas-Hamilton, Lord James


Atkinson, David (B'mouth, East)
Brown, Sir Edward (Bath)
Drayson, Burnaby


Baker, Kenneth
Bryan, Sir Paul
du Cann, Rt Hon Edward


Banks, Robert
Buchanan-Smith, Alick
Dunlop, John


Bell, Ronald
Buck, Antony
Durant, Tony


Bendall, Vivian
Budgen, Nick
Dykes, Hugh


Bennett, Sir Frederic (Torbay)
Bulmer, Esmond
Edwards, Nicholas (Pembroke)


Bennett, Dr Reginald (Fareham)
Burden, F. A.
Elliott, Sir William


Benyon, W.
Butler, Adam (Bosworth)
Fairbairn, Nicholas


Berry, Hon Anthony
Chalker, Mrs Lynda
Fairgrieve, Russell


Biffen, John
Churchill, W. S.
Farr, John


Biggs-Davison, John
Clark, Alan (Plymouth, Sutton)
Fell, Anthony


Body, Richard
Clark, William (Croydon S)
Finsberg, Geoffrey


Boscawen, Hon Robert
Cooke, Robert (Bristol W)
Fisher, Sir Nigel


Bottomley, Peter
Cope, John
Fletcher, Alex (Edinburgh N)


Bowden, A. (Brighton, Kemptown)
Cormack, Patrick
Fletcher-Cooke, Charles


Boyson, Dr Rhodes (Brent)
Costain, A. P.
Fookes, Miss Janet


Braine, Sir Bernard
Craig, Rt Hon W. (Belfast E)
Forman, Nigel


Brittan, Leon
Davies, Rt Hon J. (Knutsford)
Fox, Marcus




Gardiner, George (Reigate)
Lester, Jim (Beeston)
Rhodes James, R.


Gardner, Edward (S Fylde)
Lewis, Kenneth (Rutland)
Rhys Williams, Sir Brandon


Gilmour, Rt Hon Sir Ian (Chesham)
Lloyd, Ian
Ridley, Hon Nicholas


Glyn, Dr Alan
Loveridge, John
Ridsdale, Julian


Goodhart, Philip
Luce, Richard
Rifklnd, Malcolm


Goodlad, Alastair
McCrindle, Robert
Roberts, Wyn (Conway)


Gorst, John
Macfarlane, Neil
Rodgers, Sir John (Sevenoaks)


Gow, Ian (Eastbourne)
MacGregor, John
Rossi, Hugh (Hornsey)


Gower, Sir Raymond (Barry)
MacKay, Andrew (Stechford)
Rost, Peter (SE Derbyshire)


Grant, Anthony (Harrow C)
Macmillan, Rt Hon M. (Farnham)
Royle, Sir Anthony


Grieve, Percy
McNair-Wilson, M. (Newbury)
Sainsbury, Tim


Griffiths, Eldon
McNair-Wilson, P. (New Forest)
St. John-Stevas, Norman


Grylls, Michael
Madel, David
Scott, Nicholas


Hamilton, Archibald (Epsom &amp; Ewell)
Marten, Neil
Scott-Hopkins, James


Hamilton, Michael (Salisbury)
Mates, Michael
Shaw, Giles (Pudsey)


Hampson, Dr Keith
Mather, Carol
Shaw, Michael (Scarborough)


Hannam, John
Maude, Angus
Shelton, William (Streatham)


Harrison, Col Sir Harwood (Eye)
Maudling, Rt Hon Reginald
Shersby, Michael


Harvie Anderson, Rt Hon Miss
Maxwell-Hyslop, Robin
Sims, Roger


Haselhurst, Alan
Mayhew, Patrick
Sinclair, Sir George


Hastings, Stephen
Meyer, Sir Anthony
Smith, Dudley (Warwick)


Havers, Rt Hon Sir Michael
Miller, Hal (Bromsgrove)
Smith, Timothy John (Ashfield)


Hawkins, Paul
Mills, Peter
Speed, Keith


Hayhoe, Barney
Mitchell, David (Basingstoke)
Spence, John


Heath, Rt Hon Edward
Moate, Roger
Spicer, Jim (W Dorset)


Higgins, Terence L.
Moore, John (Croydon C)
Spicer, Michael (S Worcester)


Hodgson, Robin
More, Jasper (Ludlow)
Sproat, Iain


Holland, Philip
Morgan, Geraint
Stainton, Keith


Hordern, Peter
Morgan-Giles, Rear-Admiral
Stanbrook, Ivor


Howe, Rt Hon Sir Geoffrey
Morris, Michael (Northampton S)
Stanley, John


Howell, David (Guildford)
Morrison, Charles (Devizes)
Steen, Anthony (Wavertree)


Howell, Ralph (North Norfolk)
Morrison, Hon Peter (Chester)
Stewart, Ian (Hitchin)


Hunt, David (Wirral)
Neave, Airey
Stokes, John


Hunt, John (Ravensbourne)
Nelson, Anthony
Stradling Thomas, J.


Hurd, Douglas
Neubert, Michael
Tapsell, Peter


Hutchison, Michael Clark
Newton, Tony
Taylor, Teddy (Cathcart)


Irving, Charles (Cheltenham)
Normanton, Tom
Tebbit, Norman


James, David
Nott, John
Temple-Morris, Peter


Jenkin, Rt Hon P. (Wanst'd &amp; W'dl'd)
Onslow, Cranley
Thatcher, Rt Hon Margaret


Jessel, Toby
Osborn, John
Thomas, Rt Hon P. (Hendon S)


Johnson Smith, G. (E. Grinstead)
Page, John (Harrow West)
Townsend, Cyril D.


Jones, Arthur (Daventry)
Page, Rt Hon R. Graham (Crosby)
Vaughan, Dr Gerard


Jopling, Michael
Page, Richard (Workington)
Viggers, Peter


Kaberry, Sir Donald
Pattie, Geoffrey
Wakeham, John


Kellett-Bowman, Mrs Elaine
Percival, Ian
Walder, David (Clitheroe)


Kershaw, Anthony
Peyton, Rt Hon John
Walker, Rt Hon P. (Worcester)


Kilfedder, James
Pink, R. Bonner
Walker-Smith, Rt Hon Sir Derek


Kimball, Marcus
Prentice, Rt Hon Reg
Walters, Dennis


King, Evelyn (South Dorset)
Price, David (Eastleigh)
Warren, Kenneth


King, Tom (Bridgwater)
Prior, Rt Hon James
Weatherill, Bernard


Kitson, Sir Timothy
Pym, Rt Hon Francis
Whitney, Raymond


Knight, Mrs Jill
Raison, Timothy
Wiggin, Jerry


Knox, David
Rathbone, Tim
Winterton, Nicholas


Lamont, Norman
Rees, Peter (Dover &amp; Deal)



Langford-Holt, Sir John
Rees-Davies, W. R.
TELLERS FOR THE AYES:


Latham, Michael (Melton)
Renton, Rt Hon Sir D. (Hunts)
Sir George Young and


Lawrence, Ivan
Renton, Tim (Mid-Sussex)
Mr. Spencer Le Marchant.


Lawson, Nigel




NOES


Abse, Leo
Bray, Dr Jeremy
Crawshaw, Richard


Allaun, Frank
Broughton, Sir Alfred
Cryer, Bob


Anderson, Donald
Brown, Hugh D. (Provan)
Cunningham, G. (Islington S)


Archer, Rt Hon Peter
Brown, Robert C. (Newcastle W)
Cunningham, Dr J. (Whiteh)


Armstrong, Ernest
Brown, Ronald (Hackney S)
Davidson, Arthur


Ashley, Jack
Buchan, Norman
Davies, Bryan (Enfield N)


Ashton, Joe
Buchanan, Richard
Davies, Rt Hon Denzil


Atkins, Ronald (Preston N)
Callaghan, Jim (Middleton &amp; P)
Davies, Ifor (Gower)


Atkinson, Norman (H'gey, Tott'ham)
Campbell, Ian
Davis, Clinton (Hackney C)


Bagier, Gordon A. T.
Canavan, Dennis
Deakins, Eric


Bain, Mrs Margaret
Carmichael, Neil
de Freitas, Rt Hon Sir Geoffrey


Barnett, Guy (Greenwich)
Carter, Ray
Dell, Rt Hon Edmund


Barnett, Rt Hon Joel (Heywood)
Carter-Jones, Lewis
Dempsey, James


Bates, Alf
Cartwright, John
Dewar, Donald


Bean, R. E.
Castle, Rt Hon Barbara
Doig, Peter


Benn, Rt Hon Anthony Wedgwood
Clemitson, Ivor
Dormand, J. D.


Bldwell, Sydney
Cocks, Rt Hon Michael (Bristol S)
Douglas-Mann, Bruce


Bishop, Rt Hon Edward
Coleman, Donald
Dunnett, Jack


Blenkinsop, Arthur
Cook, Robin F. (Edin C)
Dunwoody, Mrs Gwyneth


Booth, Rt Hon Albert
Corbett, Robin
Eadie, Alex


Boothroyd, Miss Betty
Cowans, Harry
Edwards, Robert (Wolv SE)


Bottomley, Rt Hon Arthur
Cox, Thomas (Tooting)
Ellis, John (Brigg &amp; Scun)


Boyden, James (Bish Auck)
Craigen, Jim (Maryhill)
Ellis, Tom (Wrexham)


Bradley, Tom
Crawford, Douglas
English, Michael







Evans, Fred (Caerphilly)
Leadbitter, Ted
Sedgemore, Brian


Evans, Gwynfor (Carmarthen)
Lestor, Miss John (Eton &amp; Slough)
Sever, John


Evans, John (Newton)
Lewis, Arthur (Newham N)
Shaw, Arnold (Ilford South)


Ewing, Harry (Stirling)
Lewis, Ron (Carlisle)
Sheldon, Rt Hon Robert


Faulds, Andrew
Litterick, Tom
Shore, Rt Hon Peter


Fernyhough, Rt Hon E.
Loyden, Eddie
Short, Mrs Renée (Wolv NE)


Fitch, Alan (Wigan)
Luard, Evan
Silkin, Rt Hon John (Deptford)


Flannery, Martin
Lyon, Alexander (York)
Silkin, Rt Hon S. C. (Dulwich)


Fletcher, Ted (Darlington)
Mabon, Rt Hon Dr J. Dickson
Silverman, Julius


Foot, Rt Hon Michael
McElhone, Frank
Skinner, Dennis


Ford, Ben
MacFarquhar, Roderick
Smith, Rt. Hon. John (N Lanarkshire)


Fowler, Gerald (The Wrekin)
McGuire, Michael (Ince)
Snape, Peter


Fraser, John (Lambeth, N'w'd)
MacKenzie, Rt Hon Gregor
Spearing, Nigel


Freeson, Rt Hon Reginald
McNamara, Kevin
Spriggs, Leslie


Garrett, John (Norwich S)
Madden, Max
Stallard, A. W.


Garrett, W. E. (Wallsend)
Magee, Bryan
Steel, Rt Hon David


George, Bruce
Mahon, Simon
Stewart, Rt Hon Donald


Gilbert, Rt Hon Dr John
Mallalieu, J. P. W.
Stewart, Rt Hon M. (Fulham)


Ginsburg, David
Marshall, Dr Edmund (Goole)
Stoddart, David


Golding, John
Marshall, Jim (Leicester S)
Stott, Roger


Gould, Bryan
Mason, Rt Hon Roy
Summerskill, Hon Dr Shirley


Gourlay, Harry
Maynard, Miss Joan
Swain, Thomas


Graham, Ted
Meacher, Michael
Taylor, Mrs Ann (Bolton W)


Grant, John (Islington C)
Millan, Rt Hon Bruce
Thomas, Dafydd (Merioneth)


Grimond, Rt Hon J.
Mitchell, Austin (Grimsby)
Thomas, Ron (Bristol NW)


Grocott, Bruce
Molloy, William
Thompson, George


Hamilton, W. W. (Central Fife)
Moonman, Eric
Thorne, Stan (Preston South)


Harrison, Rt Hon Walter
Morris, Alfred (Wythenshawe)
Thorpe, Rt Hon Jeremy (N Devon)


Hart, Rt Hon Judith
Morris, Rt Hon J. (Aberavon)
Tierney, Sydney


Hattersley, Rt Hon Roy
Mulley, Rt Hon Frederick
Tilley, John


Hayman, Mrs Helena
Newens, Stanley
Tinn, James


Healey, Rt Hon Denis
Noble, Mike
Tomlinson, John


Heffer, Eric S.
Oakes, Gordon
Tomney, Frank


Henderson, Douglas
Ogden, Eric
Torney, Tom


Horam, John
O'Halloran, Michael
Urwin T. W.


Howell, Rt Hon Denis (B'ham, Sm H)
Orme, Rt Hon Stanley
Varley, Rt Hon Eric G.


Hoyle, Doug (Nelson)
Ovenden, John
Walker, Harold (Doncaster)


Huckfield, Les
Owen, Rt Hon Dr David
Walker, Terry (Kingswood)


Hughes, Mark (Durham)
Padley, Walter
Ward, Michael


Hughes, Robert (Aberdeen N)
Pardoe, John
Watkins, David


Hughes, Roy (Newport)
Park, George
Watkinson, John


Hunter, Adam
Parker, John
Weetch, Ken


Irvine, Rt Hon Sir A. (Edge Hill)
Parry, Robert
Weitzman, David


Irving, Rt Hon S. (Dartford)
Pavitt, Laurie
Wellbeloved, James


Jackson, Colin (Brighouse)
Pendry, Tom
Welsh, Andrew


Jackson, Miss Margaret (Lincoln)
Phipps, Dr Colin
White, Frank R. (Bury)


Janner, Greville
Prescott, John
White, James (Pollok)


Jay, Rt Hon Douglas
Price, C. (Lewisham W)
Whitehead, Phillip


Jeger, Mrs Lena
Price, William (Rugby)
Whitlock, William


Jenkins, Hugh (Putney)
Radice, Giles
Willey, Rt Hon Frederick


John Brynmor
Rees, Rt Hon Merlyn (Leeds S)
Williams, Rt Hon Alan (Swansea W)


Johnson, James (Hull West)
Reid, George
Williams, Rt Hon Shirley (Hertford)


Johnson, Walter (Derby S)
Richardson, Miss Jo
Williams, Sir Thomas (Warrington)


Johnston, Russell (Inverness)
Roberts, Albert (Normanton)
Wilson, Gordon (Dundee E)


Jones, Alec (Rhondda)
Roberts, Gwilym (Cannock)
Wilson, William (Coventry SE)


Jones, Dan (Burnley)
Robertson, George (Hamilton)
Wise, Mrs Audrey


Judd, Frank
Roderick, Caerwyn
Woof, Robert


Kelley, Richard
Rodgers, George (Chorley)
Wrigglesworth, Ian


Kerr, Russell
Rodgers, Rt Hon William (Stockton)
Young, David (Bolton E)


Kilroy-Silk, Robert
Rooker, J. W.



Kinnock, Neil
Roper, John
TELLERS FOR THE NOES


Lambie, David
Rose, Paul B.
Mr. James Hamilton and


Lamond, James
Ross, Rt Hon W. (Kilmarnock)
Mr. Joseph Dean.


Latham, Arthur (Paddington)
Rowlands, Ted

Question accordingly negatived.

Clause 36

RELIEF FOR GAINS LESS THAN £9,500.

Mr. Denzil Davies: I beg to move amendment no. 19, in page 27, line 23, leave out subsections (5) and (6).

Mr. Deputy Speaker (Sir Myer Galpern): With this we may take the following amendments: No. 128, in page 27,

line 23, leave out from beginning to end of line 27 on page 28.
No. 129, in page 28, line 44, at end insert—
'Provided that no increase in the total liability to capital gains tax for the years of assessment 1977–78 and 1978–79 shall result from the provisions of this section in the case of a husband and wife living together over what their total liability thereto would have been but for the changes made by this section'.
Government amendments nos. 20 and 21.
Government amendment no. 22:

New Schedule

RELIEF FOR GAINS LESS THAN £9,500

Preliminary

1. In this Schedule references to any subsections not otherwise identified are references to subsections of section 36 of this Act.

Husband and wife

2.—(1) For any year of assessment during which a married woman is living with her husband subsections (1) to (4) shall apply to them as if the amounts of £1,000, £5,000 and £600 were divided between them—

(a) in proportion to their respective taxable amounts for that year (disregarding for this purpose paragraphs (a) and (b) of subsection (4)); or
(b) where the aggregate of those amounts does not exceed £1,000 and allowable losses accruing to either of them in a previous year are carried forward from that year, in such other proportion as they may agree.

(2) Sub-paragraph (1) above shall also apply for any year of assessment during a part of which (being a part beginning with 6th April) a married woman is living with her husband but—

(a) her taxable amount for that year shall not include chargeable gains or allowable losses accruing to her in the remainder of the year; and
(b) subsections (1) to (4) shall apply to her (without the modification in sub-paragraph (1) above) for the remainder of the year as if it were a separate year of assessment.

3.—(1) for any year of assessment during which or during a part of which (being a part beginning with 6th April) the individual is a married man whose wife is living with him and in relation to whom paragraph 3(1) of Schedule 10 to the Finance Act 1965 applies subsection (7) shall apply as if—

(a) the chargeable gains accruing to him in the year included those accruing to her in the year or the part of the year; and
(b) all the disposals of assets made by her in the year or the part of the year were made by him.

(2) Subsection (7) shall not apply for any year of assessment during which or during a part of which (being a part beginning with 6th April)—

(a) the individual is a married man whose wife is living with him but in relation to whom the said paragraph 3(1) does not apply; or
(b) the individual is a married woman living with her husband.

Personal Representatives

4. For the year of assessment in which an individual dies and for the two next following years of assessment, subsections (1) to (4) and (7) shall apply to his personal representatives as they apply to an individual.

Trustees

5.—(1) For any year of assessment during the whole or part of which settled property is held on trusts which secure that, during the lifetime of a mentally disabled person or a person in receipt of attendance allowance, any of the property which is applied, and any income arising from the property, is applied only or mainly for the benefit of that person, subsections (1) to (4) and (7) shall apply to the trustees of the settlement as they apply to an individual.

(2) In this paragraph "mentally disabled person" means a person who by reason of mental disorder within the meaning of the Mental Health Act 1959 is incapable of administering his property or managing his affairs and "attendance allowance" means an allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975.

6.—(1) For any year of assessment during the whole or part of which any property is settled property, not being a year of assessment for which paragraph 5(1) above applies, subsections (1) to (4) and (7) shall apply to the trustees of a settlement as they apply to an individual but with the following modifications.

(2) In subsections (1), (4) and (7) for "£1,000" there shall be substituted "£500".

(3) For subsections (2) and (3) there shall be substituted—
(2) If an individual's taxable amount for a year of assessment exceeds £500 the amount of capital gains tax to which he is chargeable for that year shall not exceed one-half of the excess.

(4) In subsection (7) for "£5,000" there shall be substituted "£2,500".

(5) This paragraph applies where the settlement was made before 7th June 1978.'.

Amendment (b), leave out paragraphs 2 and 3.

Amendment (f), in paragraph 6(1), after "applies" insert
or in which an interest in possesion exists".

Amendment (a), in paragraph 6(1) leave out from "individual" to end of paragraph.

Amendment (c), in paragraph 6(5) leave out
where the settlement was made before 7th June 1978
and insert
whenever the settlement was made".

Amendment (e), after paragraph 6(5) insert
'(6) Interest in possession means an interest in possession to which an individual is beneficially entitled'.

Amendment (d), after paragraph 6(5) insert
'7. For any year of assessment during the whole or part of which settled property is held


in trust so that an individual has an interest in possession in which he is beneficially entitled, subsections (1) to (4) and (7) shall apply to the trustees of the settlement as they apply to an individual'.

4.45 p.m.

Mr. Denzil Davies: Amendment no. 19 and the other Government amendments which are being taken with it implement undertakings given by the Government in Committee relating to the lower rate of charge for capital gains tax.
First, they extend the reliefs in clause 36 from capital gains tax in certain cases to the trustees of a settlement for a mentally disabled person or for a person in receipt of attendance allowance. Secondly, they provide an exemption for all other trusts where the settlement was made before 7th June 1978. The exemption applies from 1977–78 where the net gains of the year do not exced £500, and there is a marginal relief which limits the tax bill to one-half of the excess of those gains over £500. The relief thus runs out where the gains reach £1,250.
Those two provisions meet my right hon. Friend the Chief Secretary's undertaking in Committee to produce an interim measure, pending the outcome of consultations between the Inland Revenue and interested bodies including the Opposition and the Liberals' advisers, on the possible form of a long-term solution.
Thirdly, the amendments extend the full reliefs in clause 36 to personal representatives for gains accruing to them in the year of death and in the two following years of assessment.
I hope that with this explanation the House will be clear as to the nature of the amendments.

Mr. Anthony Nelson: To the extent that the schedule tabled by the Government meets the undertaking and commitment given by them in Committee, we welcome this extension of partial capital gains tax relief. We welcome the extension of relief to personal representatives, and the two-year period seems to me to be entirely reasonable.
We have tabled a number of amendments to the Government's schedule. Those in the name of my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) seem to explore the position of man and wife in terms of the relief with which they will be provided in the new schedule.

We spoke in Committee about the extent to which husband and wife should be entitled separately to claim the full relief, as individuals, provided in the clause, and my hon. and learned Friend's amendments seek to some extent to do that on this occasion.
Amendment (a) to the schedule, tabled in my name, seeks to extend the relief provided to trustees of a settlement with settled property so that all trusts can benefit, as in paragraph 5(1) of the new schedule.
The Government clearly accepted—certainly the Chief Secretary did in Committee—the case for extending the relief provided to individuals under the clause to trusts generally but felt unable, partly because of drafting difficulties of ensuring that multiple relief was not provided to trusts so that the opportunities for avoidance were extended, to extend this to trusts which could not be clearly defined as being in the interests of severely disabled or mentally disabled people. This seems to me to be an unduly difficult distinction which the Government have drawn. If there is a case for extending the full relief provided in the clause to certain categories of trusts, however well deserving those individual trusts might be, there at least seems to be a case in tax and morality for extending that relief to trusts generally.
Even after the passage of this schedule, the clause as it stands will discriminate against trusts which in many cases have been set up for minors, widows and those generally unable to manage their own affairs. It may well be that the reality of the situation is that the loss of revenue by this tax on what are effectively inflationary gains is the reason for the Government feeling unable to extend this relief rather than the difficulties of distinguishing between certain categories of trusts. The indication that about 75 per cent. of capital gains tax revenue might not be forthcoming, if the extension were provided to trusts generally, is perhaps an indicatin of the real reason for the Government feeling unable to extend this relief.

Mr. Nigel Lawson: The 75 per cent. figure is, of course, the figure that was given by the Chief Secretary. It was 75 per cent. of the total capital gains tax arising from trusts. What the


Chief Secretary never told the Committee—I think my hon. Friend would agree that it might be useful if the House were now told—is what proportion of total capital gains tax revenue is paid by trusts at the present time. In other words, we know that it is 75 per cent. on the Chief Secretary's figure, but 75 per cent. of what?

Mr. Nelson: I agree with my hon. Friend. This would be a most interesting breakdown to have. It was not provided in Committee, although I believe that on that occasion my hon. Friend pressed the point on the Chief Secretary, who did not give any elucidation.
Many trusts, regardless of their objectives and the status of the beneficiaries, may be forced to realise gains in a way that many individuals are not. For example, they may be forced to increase the yield of their portfolio or to sell shares which have been held over a long period of time. Disposals might be required for a trust to be in accordance with the Trustee Investments Act, transfers on attainment of a given age might be a condition of the trust or there might be deemed disposals. In all these cases, trusts might be forced to realise gains. But as, in the vast majority of cases—we are talking about a considerable number of trusts nationally—such realisation will result in a substantial tax liability, there seems to be an increased case in equity for this relief to be extended.
After all, differentiation in treatment might not have been so substantial before this relief was extended in the clause, but now that individuals are entitled to obtain a very valuable relief, up to about £9,500-worth of gains per annum, the exclusion entirely of certain trusts seems to be wholly unreasonable. Therefore, the extension of relief in clause 35 makes the relative position of trusts considerably worse.
I reiterate what is a powerful argument for extending this relief generally, which is that over a period of time the prejudicial treatment of trusts which are not able to claim the full relief provided in the clause can amount to a considerable difference between their treatment in respect of capital gains and an individual's treatment. The example which I

quoted in Committee was that over a period of seven years it is quite possible that a trust which realised gains of about £9,000, and over that time had losses brought forward of about £1,300 might find itself paying a capital gains tax liability of more than £2,300. Yet an individual, with exactly the same set of circumstances and assets, would pay a tax liability of only £150. In many cases, it is a pure accident that an individual happens to own the assets absolutely, or else they happen to have been provided for him in trust because of disability or whatever else. It seems wholly unreasonable that with the same set of circumstances the individual will have to pay only £150 capital gains tax whereas the trust will have to pay more than £2,300.
I believe that the arguments were to some extent accepted by the Government and that they were prepared to introduce the full relief for the two categories of trusts—those providing for people on attendance allowance and those for the mentally disabled. I put it to the Minister—I hope that he will be able to clarify this—that even here there are some difficulties of definition. I take the point that he is anxious to ensure that trusts which provide for the most disabled members of our community should be entitled to this relief. But with regard, for example, to those in receipt of attendance allowance there are many cases in which individuals who are severely disabled might not qualify for attendance allowance, but who most certainly should in any cause of equity be entitled to the relief provided in the clause.
I understand that a case is currently being pursued whereby certain individuals who have to be linked up to a kidney machine for two days a week are possibly not entitled to an attendance allowance. For these people, who in many cases are clearly severely disabled and for whom trusts may be provided, it seems unreasonable that the relief provided to individuals in the clause should not be extended to the trusts which provide for them.
To some extent this was accepted by the Chief Secretary in Committee, because he said that there was no reason why one should not seek to help such trusts, especially where they covered small amounts of capital and provided income for widows, spinsters, pensioners and other categories. I hope that this debate will


provide the Minister with an opportunity of reconsidering the matter.
There are two other matters which I should like to raise. First, the Minister said that, although he would bring forward a partial relief—that of the £500 exemption and a reduced rate thereafter, tapering out at around £1,250-worth of capital gains for trusts generally which were set up before 7th June—he would consider, in consultation with ourselves, our advisers and other interested groups, the possibility of extending or providing this relief generally later on. Although this was readily taken up by certain of our advisers, and a reply was received from the Minister, this suggestion does not appear to have been backed up by a very helpful attitude.
In the Bill, the Minister has not felt able to extend the relief and, indeed, has not given a very positive indication that he will enter into consultations with interested groups to ensure that this relief is extended by the time any future Bill is brought forward. It is obviously unlikely that this Government will bring such a Bill forward in the time left to them, but one would like to feel that the Government have the right intentions in this respect.
The only reason that the Government proffered for not providing the full relief to all trusts was, in the words of the Chief Secretary:
The reason why I suggest £500—it is, of course, a lower level—is that there would be an element of double allowance in those cases where there is a life interest in possession and the individual entitled to that interest also makes gains qualifying for relief under Clause 35."—[Official Report, Standing Committee A, 7th June 1978; c. 862.]
5.0 p.m.
It seems to me that the Minister has gone to a half-way house in that he has provided an element of relief and, therefore, to some extent accepted the equity of the Opposition's case. In view of the costs of setting up trusts, it seems unlikely that many individuals will avoid their capital gains tax liability by setting up a profusion of trusts, and, therefore, there is no reason why the relief should not be extended to them all.
Above all, we now have the nonsense of a position in which there are three categories of capital gains tax payer. There are individuals who will be entitled to the full relief provided in clause 35.

There are certain types of trust or settlement set up for severely disabled or mentally handicapped people which will also be entitled to that full relief. There are other trusts generally which provide for a relief of some £500, and there are trusts set up after 7th June which will get no such relief, as, indeed, companies will not. Therefore, it seems to me that, from having a position which persisted until a few months ago whereby everyone who realised capital gains was treated on the same basis, we shall have after the passing of the Bill a position in which there will be three different categories of capital gains tax payer.
Pressing again the principle of simplicity, it seems to be desirable that the Government should consider the possibility, as we suggest in amendment (a), of extending this relief to all trusts generally.
Amendment (c) seeks to ensure that the partial relief provided to all trusts in the new schedule does not apply only to those set up before the date of the announcement of this relief on 7th June but should extend to them whenever they were set up. It seems to me to be unduly arbitrary that such relief should be provided only to trusts which existed at that date, and it is hardly likely that a great profusion of trusts would be set up thereafter to claim what in any event is only a very marginal relief compared with that applying to an individual—petering out at £1,250 compared with £9,500 in the case of an individual.
I am sure that I do not need to repeat all the arguments which were advanced in Committee. Therefore, on the basis of what I have said, I hope that the Minister will feel able on reconsideration to accept amendment (a) and amendment (c).

Mr. Tony Newton: I wish to support amendment (a) and, in particular, what my hon. Friend the Member for Chichester (Mr. Nelson) said about the problem of disabled people. It seems to me that what the Government are proposing here—and I understand the Minister to be saying that these are essentially transitional provisions pending further consultation about the long-term solution—reveals the problems which are likely to arise when the Government attach excessive importance to not allowing any


additional benefit to people of whom they do not really approve and, therefore, try to draw difficult distinctions between approved people and disapproved people for the purposes of taxation.
That is clearly revealed by the Government's proposals in that they have accepted—I think rightly—that it would be unfair if trusts set up for the benefit of disabled people in broad terms were not to get reasonable tax advantages under these proposals. But the Government have not been prepared to allow those advantages to trusts generally. So we have paragraph 5(2) attempting to define disabled people for the purposes of this provision.
Broadly speaking, it is probably all right in terms of the mentally disabled, because there is a reasonably clear-cut and fairly broad definition which can be drawn from the Mental Health Act 1959 and which is incorporated in this provision. It is when we come to the physically disabled that we see the possible absurdities and certainly the possible anomalies in what the Government propose. The only physically disabled people who will benefit from the concession in the new schedule are those who are in receipt of attendance allowance.
There are not a large number of hon. Members in the Chamber at the moment, but I should guess that there is not an hon. Member present who has not had correspondence with constituents, with the Attendance Allowance Board and with Ministers which has not revealed just how restrictive are the criteria for the attendance allowance. A person has to require constant attendance by day and by night. Alternatively, for the lower rate of the allowance, he must require constant attendance throughout the day or throughout the night. A person has to be very severely disabled before he can qualify for the attendance allowance.
In no way can very large numbers of people who are by any commonsense or normal definition severely disabled—often lacking limbs, for example—qualify for the attendance allowance. It should be made clear to the House that a very large number of disabled people who probably everyone in the House would accept on a commonsense basis should be able to

benefit from trusts under these proposals will not be able to do so because of the narrow definition which has been adopted.
There may, for example, be children getting compensation payments as a result of the recent announcement about vaccine damage. If the money were put into trust for them, they would not qualify for the tax advantages here. Admittedly it would depend on the extent of the vaccine damage, but it is possible that they would not necessarily qualify under these provisions.
It is perhaps less likely, but it may be that some of the thalidomide children would not qualify as being severely disabled enough for attendance allowance, depending on the extent of the injuries. They, too, would not qualify for any benefits to a trust set up on their behalf under this provision.
We know that the Attendance Allowance Board is in process of trying to withdraw the attendance allowance from numbers of kidney patients. There is a case before the national insurance commissioner, whose decision is about to be announced, which I hope will overthrow the efforts of the Attendance Allowance Board, and if the commissioner does not overthrow them I hope that this House will. At the moment, however, the board is trying to withdraw attendance allowance from numbers of kidney patients because they dialyse only two days a week instead of three. If the Attendance Allowance Board is upheld and if Parliament does not upset the national insurance commissioner in that event, those kidney patients will not qualify in relation to a trust under this provision.
It seems to me, therefore, that there is a real risk of injustice and serious anomaly from the proposals as they stand and that the Minister ought to solve the problem by accepting the amendment to allow all trusts to qualify pending some further work, if that is what the right hon. Gentleman wishes to do, to identify the disabled on a broader basis. However, what would be very unfair and full of potential anomaly would be to allow the new schedule to pass into law as it stands at the moment.

Mr. Lawson: It is worth recalling the origins of this very long, complex new schedule.
It began with the Inland Revenue's consultative document on capital gains tax last October, which dealt with the totally unwarranted severity of capital gains tax at a time of inflation. There was a great deal of discussion about indexation and tabling and, at the end of the day, the Revenue came to the conclusion that all this was far too complicated for it. So, as a sop and because it was administratively convenient obviously to take a lot of people who were making only paper gains out of the gains tax net, it was decided to introduce a relief. So the relief was introduced in a rather inadequate way to meet the point. Nevertheless, it was a relief that we welcomed. Any relief is better than none. But the relief did not extend to trusts, and this was obviously grossly unfair on those who, for whatever reason, had their capital in trust and not held absolutely or directly.
This was not contested when we put forward the argument in Committee. As a result, in order to meet it, the Government have produced this extremely complicated new schedule. I am afraid, as my hon. Friends have already pointed out, that the Government still have not got it right.
There is something very curious about the Government, once having accepted that people who have capital held in trust need to be given relief in the same way as individuals are, should then say that they will give that relief only to some kinds of trust. They seem to think that individuals whose capital is held in trust in some circumstances are particularly worthy. That is not the point at issue. The point at issue is the unfairness between those who hold capital in trust and those who hold it absolutely. That is where the unfairness comes in.
The only way of meeting that is to give relief to all those whose capital is held in trust and not draw an arbitrary distinction between them. They should all get the same relief.
As my hon. Friend the Member for Braintree (Mr. Newton) has pointed out, for the physically disabled the line is drawn between those worthy of full relief and those less worthy who get only partial relief on the totally arbitrary and unsustainable basis of those who get the attendance allowance and those who do

not. That is purely for administrative convenience.
The only sensible thing for us to do would be to press amendment (a). Should that by any chance fail there is also the point of amendment (c). What the Government have done here is totally unsustainable. They have said they accept the arguments about unfairness to trusts and therefore they will give relief to trusts, but only to those already in existence at the time that we debated this matter upstairs in Committee. New trusts formed subsequently will not be eligible for any relief whatsover. That is the meaning of the last line of this lengthy schedule.
The point at issue here—I hope that the Minister of State will pay attention to the argument that I am patiently deploying despite interruptions from the Public Galleries—is that since it has been conceded that there is an unfairness to those who hold capital in trust, the relief should be given to all those trusts, even those trusts not get set up.
The Government are clearly under the impression that if they were to do this a whole lot of people would subsequently set up trusts all over the country. That is palpably absurd. The relief is so small that the costs of setting up the trust would not make it worth a candle. But of course there will be all sorts of people who, for normal and genuine reasons, will set up trusts subsequent to 7th June. They will get no relief at all, because of this arbitrary line in the Government's schedule. That is wholly unjustifiable. Therefore I hope that we shall have the opportunity to press this amendment to a Division if amendment (a) is not carried.
When the Minister of State was introducing this he said that it was only a temporary, rough-and-ready solution, pending full consultation. The Chief Secretary had promised full consultations on a proper solution to this problem. These consultations were to be with the various advisers, including our advisers on the Opposition side of the House. I shall read to the House what the Chief Secretary said on 7th June:
I propose that there should be wide consultations between the Inland Revenue and various institutions and individuals—including the advisers of both hon. Gentlemen—to see whether an answer can be found to the problem.


He went on:
I hope that we can have consultations fairly quickly, and if some other forms of trust can be included for Report I shall willingly look at them. I certainly do not rule them out entirely."—[Official Report, Standing Committee A, 7th June 1978; c. 862.]
Clearly we thought that there would be consultations with our advisers and the Inland Revenue between 7th June and Report, so that we could see whether some sense could be made from this nonsense.
Instead, after accepting—which we did, both orally and in writing—the Chief Secretary's offer of consultations with our advisers, we suddenly received a letter nut of the blue from the private secretary to the Chief Secretary saying that he was terribly sorry but there was absolutely nothing that could be done before Report and that there was no possibility of any discussions before September at the earliest.
That goes back on the Chief Secretary's word, and is very shameful. Many people were hoping that as a result of the Chief Secretary's offer something could be done—as the Chief Secretary had indicated in the excerpt from Hansard that I have quoted—to find some way of bringing these people and their trusts within the ambit of the relief.
It is deplorable that these consultations should not have taken place, and that the Bill is passing on to the statute book in this form. Of course, the consultations might not have produced any answers, but at least they should have been attempted. It is really very regrettable that, having made this offer, which we welcomed unreservedly at the time, we should now he told that there is no possibility of any talks until September. That is a rather empty offer anyway, because in September there will be an election campaign, leading to a change of Government.

5.15 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The hon. Member gave the impression that the Chief Secretary gave an undertaking that consultations would take place before Report. That is not so. The hon. Gentleman must be aware that the undertaking was given without a time limit. Because of the particular problems in

volved, most notably the short space of time between Committee and Report, it was not practical, nor was it expected, either then or later, that these consultations would be held in that period.

Mr. Lawson: I understand the Financial Secretary's loyalty to the Chief Secretary. I can only reply to him—notwithstanding the efforts of the Minister of State's compatriots in the Public Galleries—by reading again what the Chief Secretary said in Hansard on 7th June. He said:
I hope that we can have consultations fairly quickly, and if some other forms of trust can be included for Report I shall willingly look at them. I certainly do not rule them out entirely."—[Official Report Standing Committee A, 7th June 1978; c. 862.]
That is what he said, and the Financial Secretary cannot get away from that.
Therefore subject to anything that the Minister of State may say in replying to this debate, we shall certainly wish, when the time comes, to press these matters to a Division.

Mr. Denzil Davies: The hon. Member for Chichester (Mr. Nelson) moved amendment (a), which I understand will be pressed to a Division, either now or later on, unless hon. Members are convinced by my arguments in the mean-time. [An HON. MEMBER: "They would be more convincing in Welsh."] I am quite prepared to reply to the debate in Welsh if hon. Members would prefer it, but it would not be in order.
Amendment (a) apparently commends itself to the Conservatives. I was asked about the yield from capital gains tax in relation to trusts. The figure that I have, which is the best estimate that the Inland Revenue has, is about £60 million a year. If amendment (a) is accepted, depending on how many people would take advantage of the relaxation—and one can assume that almost anyone who could would do so—the estimate of the loss of yield would be about £50 million. That is the best figure that I can give to the hon. Gentleman.
Accepting amendment (a) would involve—not immediately, because it would take some time to split up some trusts—a loss to the Revenue of about £50 million. It is only fair that I should tell hon. Members that before they press their amendment.

Mr. Lawson: The Minister of State will agree that the first-year costs—thisyear costs—would be a tiny fraction of that amount.

Mr. Davies: I do not know how the hon. Member is able to be much more certain than I can be. It may be possible for a large number of these trusts to be split or broken up into smaller units, and within this year it may be that it would involved half of the £50 million. I do not know. I said that I could not say—and neither can the hon. Gentleman. I think that the statement that he has made could not be substantiated. We are talking about £50 million, whether it is this year or next year.
I hate to quote back at hon. Members what they said in Committee, because they might quote back at me what I said in Committee. However, in Committee the hon. Member for Chichester said, in moving other amendments on these lines, that he wished
to ensure that no individual is able to circumvent his tax liability by setting up multiple trusts."—[Official Report, Standing Committee A, 7th June 1978; c. 850.]
It follows from amendment (a) that what would happen would be the setting up of multiple trusts. That is the reason why we are finding so much difficulty in giving to trusts the relief that is given to individuals. There is no secret about this. The main reason for the difficulty is that once that kind of relief is given to trusts, there will be a proliferation of multiple trusts, to take advantage of the low rate. As I have indicated, we believe that the cost of that would be about £50 million.

Mr. Nelson: However deserving are the beneficiaries of the trusts that will receive the full relief under the new schedule—and I am sure that they are deserving—is it not the case that were they minded to set up multiple trusts, even in those limited deserving categories, they would not be prevented from doing so under the new schedule as it is drafted? The Minister cannot have it both ways.

Mr. Davies: I accept that entirely. That is where the dilemma takes us. Once we recognised that there was a problem relating to the multiplicity of trusts that would follow from amendment (a) we failed, in time for the Finance Bill and these debates, to produce something that

would give a measure of relief to trusts without entailing this danger.
But we recognise, of course, that there are certain categories that are very deserving—trusts for the mentally handicapped and the physically handicapped. We gave a measure of relief in those cases. I recognise that it is illogical—at any rate, it is not completely logical—but it follows from the difficulty.
My right hon. Friend the Chief Secretary offered consultations with the Opposition on this point. We recognised the difficulty and we offered consultations to see how we could give relief to trusts in general without creating a state of affairs in which there would be a multiplicity of trusts, trusts split up. We do not know yet how to deal with that. It seems that the Opposition do not know how to deal with it, either, because now they are pressing amendment (a), which would create that very situation. I do not know where that leaves the consultations, or whether hon. Members still wish to have consultations if they are to press amendment (a).

Mr. Lawson: Tomorrow.

Mr. Davies: That is entirely a matter for the Opposition. However, I should have thought that having made up their minds by voting for amendment (a), having said "We stand for the same regime on trusts as for individuals", and knowing that the consequence of that is bound to be a multiplicity of trusts, there would not be much to consult about, although we shall be quite happy to honour the undertaking and to go on with the consultations.
The hon. Member for Braintree (Mr. Newton) dealt with a narrower point. He said that there was some difficulty, in that there could be cases in which individuals who are not in receipt of attendance allowance could still be physically disabled. I accept entirely that there may be some such cases. But whatever definition one introduces into the legislation—and this category is the one used for capital transfer tax purposes, as the hon. Member will know—if one were merely to say "physically disabled" or "seriously disabled", one would still have the same problem of having to decide whether, in a particular case, a person fell within whatever definition was laid down.

Mr. Newton: I accept that this will be one of the long-term difficulties with all our provision for the disabled. However, why, for example, was this not extended also to people in receipt of mobility allowance, who are defined as being unable to walk or virtually unable to walk? Many of those will not be in receipt of the attendance allowance but are, none the less, so disabled that they are unable to walk, or virtually unable to walk.

Mr. Davies: This matter was debated at some length in discussion on the Finance Act 1977, when we looked at it in relation to capital transfer tax. It was felt at the time—and this was accepted—that the best definition was the receipt of attendance allowance, but I accept entirely that one could use other definitions. However, one still has the same problem. If we change this definition to mobility allowance, next year the hon. Member will table an amendment and will no doubt be able to find cases in which people are not in receipt of mobility allowance but are still physically disabled and should be benefited. So this is a problem that will remain with us whatever choice of definition we make.
I think that I have dealt with most of the—

Mr. Lawson: The date—amendment (c).

Mr. Davies: The date is, I think, a reasonable date. As my right hon. Friend said in Committee, this is a temporary relief, pending consultations, which we would have hoped that we would have had with the Opposition, without them committing themselves in the way that they propose, it seems, by voting for amendment (a). We hope that this is a temporary measure and that we can have consultations. We hope that next year we shall be able to bring something forward that is clearer and more logical than the present position.
I accept that the present position is entirely illogical. That is why the date was chosen. It is a reasonable date. It is a temporary solution pending consultations. But now, as I have said, the Opposition are deciding that they want amendment (a) with all the consequences of the multiplicity of trusts, and I wonder how fruitful those consultations will be.

Therefore, I cannot accept any of the amendments.

Amendment agreed to.

Amendments made: No. 20, in page 28, line 10, leave out subsections (8) and (9) and insert—
'(8) Schedule (Relief for gains less than £9,500) to this Act shall have effect as respects the application of this section to husbands and wives, personal representatives and trustees.'.

No. 21, in page 28, line 40, leave out '(9)' and insert '(4), (7), (8)'.—[Mr. Bates.]

Clause 38

RELIEF FOR GIFTS OF BUSINESS ASSETS

Mr. Denzil Davies: I beg to move, amendment no. 57, in page 31, leave out line 7 and insert—
'(7) Subject to subsection (8) below, in this section and Schedule 7 to this Act'.

Mr. Deputy Speaker: With this we may take Government amendments nos. 58, 59 and 60.

Mr. Davies: These amendments extend the relief for gifts of business assets by expanding the word "trade" to include the activity of commercially managed woodlands. Section 33 of the Finance Act 1965 already recognises that the activity bears the characteristics of a trade by providing that the relief for the replacement of business assets should be available for assets used for the purpose of commercial woodlands. It seems reasonable to follow a similar course in clause 38 and schedule 7.
The amendments also put right a small technical defect in schedule 7. The Forestry Commission of Great Britain has brought it to our attention that clause 38 does not include the management of woodlands. This is something that we had not appreciated. I do not think that it was raised in Committee. Be that as it may, the amendments seek to put right that position. Again, it is a small measure of additional relief for woodlands.

Amendment agreed to.

Amendment made: No. 58, in page 31, line 12, at end insert—
'(8) In this section and Schedule 7 to this Act and in determining whether a company is


a trading company for the purposes of this section and that Schedule, the expression "trade" shall be taken to include the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits.'.—[Mr. Bates.]

Schedule 7

RELIEF FOR GIFTS OF BUSINESS ASSETS

Amendments made: No. 59, in page 72, line 14, at end insert 'and'.

No. 60, in page 72, line 16, leave out from 'Act' to end of line 18.—[Mr. Bates.]

Clause 40

TRANSFER OF BUSINESS ON RETIREMENT

5.30 p.m.

Mr. Denzil Davies: I beg to move amendment no. 23, in page 31, line 38, leave out 'In' and insert 'For'.

Mr. Deputy Speaker (Sir Myer Galpern): With this we may take the following amendments:
Government amendment no. 24, amendment no. 36, in page 32, line 4, after 'years', insert
'or 55 years in the case of a full-time fisherman',
and Government amendments nos. 25 to 27.

Mr. Davies: The amendment gives a scaled-down capital gains tax retirement relief where the business has been owned for less than 10 years at the time of disposal. Thus, an appropriate percentage of the maximum relief due by reference to the individual's age at the time of the disposal will be available where the period of ownership of the business falls short of 10 years, provided that the business has been owned for a year or more. The percentage will be 10 per cent. where the period is exactly one year, rising to 100 per cent. for 10 years.
The amendment also provides for the purposes of the scaled-down relief that periods in which the individual has been the proprietor of his business should be aggregated with those in which his family trading company, of which he is a full-time director, carried on the same busi

ness. Thus, the amendment brings within section 34 of the Finance Act 1965 the provision for aggregating such periods at present contained separately in paragraph 2(3) of schedule 10 to the Finance Act 1966. Paragraph 2(3) is therefore repealed.
This amendment arises as a result of a new clause tabled in Committee by the hon. Member for Weston-super-Mare (Mr. Wiggin). Since that clause was somewhat restrictive, these amendments go further than that clause and provide what I am sure the House will agree to be a welcome improvement.

Mr. Douglas Henderson: I wish to refer to amendment No. 36, which stands in my name and in the names of my SNP colleagues. The Minister of State did not refer to that amendment in his introductory remarks, but it relates to an occupational group on which I hope the Government will look with some sympathy.
We tabled the amendment in Committee, but unfortunately no SNP Member was selected to serve on that Committee. I understand that the amendment in question was not called. I hope that the Government will be sympathetic on the amendment, because it deals not with people who need periods of service or business aggregated, but with people who have spent their whole lives in the occupation of fishing—a hazardous and dangerous occupation. In the past four years, two fishing boats from my constituency have been lost without trace at sea. There have been similar catastrophes in other constituencies.
The concession that the Government have introduced on capital transfer tax is welcome, but although it is a welcome lift in the rate of concession I wish to emphasise that the cost of building fishing boats has escalated at a much greater rate. Four years ago we used to talk of a fishing boat costing £1,000 a foot. However, in respect of an 80 ft. boat—the characteristic length of boat in my constituency and in most constituencies from which the inshore fleets ply—we are now talking of a figure of between £6,000 and £7,000 a foot. A boat between 80 ft. and 85 ft. now costs about £500,000.
I wish to emphasise the social consequences, because in the Scottish fishing


industry, which the amendment seeks to benefit, the boats are not company boats but family boats. It is not a case of a large multinational company quoted on the Stock Exchange having equity in these boats and employing the skippers and crew. This is a case where the funds are generated from within the family and where the responsibility for ownership passes from father to son, as it has for generations.
I fear that one of the unintended consequences of this legislation may be that the fishing industry in Scotland will be fundamentally and radically changed. The only way to generate capital will be by bringing in company money—money which the fishermen do not want because they wish to continue to keep their boats in a family business.
In the Scottish fishing industry there are 1,000 skipper-owners who operate on a shared basis. In other words, the crew who work on the boat share in the profits. This is a socially healthy scheme to operate in this hazardous and dangerous occupation. I fear that, unless some action can be taken, the prospects of the industry continuing in this way will be jeopardised.
My right hon. Friend the Member for Western Isles (Mr. Stewart) was told in a recent parliamentary Answer by the Secretary of State for Scotland that as at December 1974 there were 2,639 boats registered in Scottish ports in the inshore fleet, ranging from boats under 40 ft. to boats up to 80 ft. Therefore, it is not an enormous problem for the Government to take care of in this legislation.
The Scottish Fishermen's Federation pointed out that when it made a submission requesting that the retirement age for inshore fishermen for the purposes of these provisions should be treated as 55 years, the Inland Revenue superannuation fund office earlier this year said that it was prepared to accept retirement annuities with a retirement age of 55 for full-time fishermen. I welcome that decision by the Inland Revenue, which seems to me to be realistic in examining the nature of the work and the problems faced by fishermen. I do not know whether the Minister of State has ever been on a fishing boat. He is looking very pensive.

Mr. Denzil Davies: Yes. I have.

Mr. Henderson: If he has been on a boat, I do not know how far out to sea he went and whether he went out of the harbour. I extend to him and to the Financial Secretary, the Chief Secretary and the Chancellor of the Exchequer, an invitation, here and now, to go aboard a fishing boat in my constituency. I will arrange it on any date that is convenient to them. They will go out on an excellent boat and they will have a pleasant trip at sea. To ensure their safety and to make sure that they will he permitted to return, I shall go with them—otherwise I am afraid I could not guarantee that they would come back.
If the Minister accepts that invitation, he might well have a better appreciation of the situation—and this applies to his Treasury colleagues and the appropriate civil servants.

Mr. J. Enoch Powell: The accommodation on the inshore boats plying out of the hon. Gentleman's constituency must be more lavish than those in the fishery of County Down. If he experiences any overcrowding as a result of his invitation, the Minister and his colleagues will be welcome and will learn a great deal if they will join in a trip on a fishing boat out of Kilkeel, in my constituency. May I add that I associate myself more seriously with the hon. Gentleman's case?

Mr. Henderson: I am grateful for the right hon. Gentleman's support. I do not propose to enter into competition with him over the merits of the boats in our constituencies. He said that the accommodation is limited on these boats, and that is true. Normally they carry a crew of seven or eight. If we were to take with us the Chancellor of the Exchequer, the Chief Secretary, the Financial Secretary, the Minister of State and two or three members of the Civil Service, we would expect—

Mr. Deputy Speaker: I hope that the hon. Gentleman is not including the occupant of the Chair, because I turn seasick very readily.

Mr. Henderson: Naturally, Mr. Deputy Speaker, I shall consult you before extending any such invitation to you, because I realise that you are not responsible for this legislation. If one had to


accommodate all those people on a normal boat there would be no room for the crew, and we would expect the Chancellor of the Exchequer, the Financial Secretary and their colleagues to play their part in hauling up the nets, operating the winches, gutting the fish, and undertaking all the other numerous tasks that have to be carried out at sea. If the Ministers underwent that experience, it might concentrate their minds wonderfully on the amendment.
This matter was referred to briefly in Committee and I pay tribute, unusually, to the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who raised it. The hon. Gentleman was given a most disturbing reply by the Chief Secretary, who made the extraordinary statement that:
It would be difficult to define a particular group—for example, fishermen—as I am sure that the hon. Gentleman will accept."—[Official Report, Standing Committee A, 13th June 1978; c. 1164.]
I do not know at what hour of the night or morning the Chief Secretary was speaking, but there is surely no difficulty in defining a particular group such as fishermen. They are defined for many purposes under the national insurance legislation and other legislation. This is a case where particular concern should be shown to a clearly understood and defined group.
There are just over 7,500 full-time fishermen in Scotland, of whom about 1,000 are skipper-owners. The Government should look at the amendment seriously for the sake of the industry, which is suffering great troubles. It is inhumane for the Government to expect fishermen to go to sea at the age of 60 or 65, facing all the hazards of their job, and not give them at least the option of the capital transfer tax relief provisions, which would allow them at the age of 55 to pass on to their sons their share in a boat. I know the fishermen in my constituency well. They are a hardy breed, and many would want to carry on, but there are some who, for health, domestic or other reasons, might decide that it was better to call it a day at 55 and allow their sons, many of whom have skippers' tickets, to take over the boats.
Even if the Minister cannot accept the amendment, will he consider the possibility that if there are medical grounds

for a skipper's early retirement, he should have the option of obtaining the capital transfer tax relief provisions at the age of 55?
I do not know what sort of reply we shall get from the Minister of State. He gave no indication of his view on the amendment when he spoke earlier, but I hope that he will give a reasoned reply and will say that the Government have considered the matter seriously, and that he will add some lustre to his name in Scotland, if nowhere else, by saying that he will accept the amendment.

Mr. Malcolm Rifkind: I have no desire to join the boat trip being thoughtfully organised by the hon. Member for Aberdeenshire, East (Mr. Henderson) for the Treasury Ministers. The hon. Gentleman and the Ministers are in deep water most of the time anyway, and I see no need for the rest of us to join them in that predicament.
I raised the matter in Committee when we considered the general question of entitlement to retirement relief. The hon. Member for Aberdeenshire, East is correct in saying that this is an unusual, perhaps even unique, case. Those working in this industry are expected to retire earlier than the general population and they are entitled to consider earlier retirement because of the nature of their work.
The Scottish Fishermen's Federation and a number of hon. Members, including my hon. Friend the Member for North Angus and Means (Mr. Buchanan-Smith), have drawn attention to the grave injustice in this case. Fishermen, particularly the inshore men, have to make a very unsatisfactory choice. Either they retire at the appropriate age for the type of work they do, and thereby lose any prospect of relief, or they carry on, despite the fact that they are approaching an age at which the nature of their job makes it highly unsatisfactory that they should carry out such arduous work.
The whole purpose of the provisions in the Finance Acts is to provide retirement relief. While the retirement ages for the bulk of the population are 65 for men and 60 for women, there should be nothing rigid about a particular age for the purposes of this entitlement. There


can be no objection in principle to allowing the relief to be available to people who retire at the normal age of retirement for the job they do.
5.45 p.m.
There may be drafting problems, and it might be wrong to make an exception for fishermen alone. There may be other groups who, for equally good reasons, have to contemplate retiring earlier than those in the rest of the population. However, even if the Minister cannot accept the amendment I hope that he will acknowledge that the case is overwhelming and that he should accept it, at least in principle.
I suggest that the Minister should say that the Government accept the justice of the case and will see whether, in future legislation, a way can be found to allow groups or individuals who, not through personal choice but by the nature of their job, are expected to retire, and perhaps have to retire, earlier than the bulk of the population should not be denied any entitlement to retirement relief of the sort proposed in the Bill.
That is not an unreasonable request. If the Minister were able to give such an assurance, some of us would be happy to accept that for the time being. I hope that he will certainly not take the negative and unhelpful view that was taken by the Minister who dealt with this matter in Committee.

Mr. Lawson: We welcome the tapering relief introduced into the retirement relief by these amendments, particularly by amendment no. 24. I wish to make only two brief observations. The first is that it is worth recording how this relief came about. In the Committee stage of the Finance Bill last year my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) moved an amendment dealing with this point. The Government said that they would look at it, but nothing happened. In the intervening year, my hon. Friend had a prolonged correspondence with the Minister of State, but there was nothing in this Bill to remedy the situation.
In Committee this year, my hon. Friend was persistent. He deserves the congratulations of the House for pursuing the matter. He tabled a new clause which,

again, was not accepted by the Government, though they accepted the principle. As a result of the campaign that my hon. Friend has waged persistently for more than a year, we now have the concession in the Bill. It is a lesson to us all that it is necessary to show persistence in these matters. Sometimes it takes longer than a year before the serried ranks of Treasury Ministers give in to a reasoned case. That is one reason why it is often important that the same points are selected for debate year after year. It is no argument for not selecting a matter for debate to say that it was selected the previous year. As this case exemplifies, it is often only through persistence that a point is met.
The other issue that I wish to raise is that although we have had eloquently expressed by the hon. Member for Aberdeenshire, East (Mr. Henderson) the case for early retirement of one category of people, there is another way of looking at the matter, namely, to consider not particularly professions or categories but those people who are forced to retire early through ill health.
I know of many cases of individuals who have not reached the age of 60 having severe heart attacks and being told they must retire and sell out on medical grounds. They are then faced with the choice of going on and probably literally killing themselves in order to try to reach the age of 60 and qualify for the relief or to retire prematurely on health grounds, in which case they will forfeit the relief altogether.
When the Minister of State is considering whether there are professional categories for whom early retirement is appropriate, he should also consider the category of people who are obliged to retire early on genuine grounds of ill health. We welcome the concession but we think that there are other important matters that need consideration.

Mr. Denzil Davies: In referring to amendment no. 36 the hon. Member for Aberdeenshire, East (Mr. Henderson) extended to my right hon. Friend the Financial Secretary and myself an invitation to go for a short trip—

Mr. Henderson: A long trip.

Mr. Davies: —on a Scottish fishing boat. If the hon. Gentleman says that the


invitation was for a long trip, that is what I feared. It will be clear to him when I finish speaking why I think it better to decline his invitation.

Mr. Henderson: Shame.

Mr. Davies: I shall confine my fishing activities to mackerel fishing off the coast of west Wales. That is a much less hazardous business, but not for the mackerel.
The hon. Gentleman made his case exclusively in respect of fishermen. We understand the hazardous nature of the work. We understand that many fishermen would wish to retire before 65 years, and that some feel that they have to stay on to get the retirement relief. The difficulty about accepting an amendment of this sort is that there may be other groups that are in the same position. As well as there being other groups there may be individuals in the same position. For instance, an individual may have a business that involves equally hazardous undertakings. That person may not form a group, but he might be in the same position as fishermen on account of the nature of his work.

Mr. Henderson: I am sorry that the right hon. Gentleman has declined my invitation to take a trip on a Scottish fishing boat. The invitation was offered in all sincerity and generosity. Now that the Financial Secretary has arrived in the Chamber, he may wish to reconsider his decision. He said that there may be other groups in the same position as fishermen. Is he able to tell the House of any comparable group?

Mr. Davies: I suppose that one could give a list.

Mr. Henderson: Give it.

Mr. Davies: Nevertheless, it is a bad precedent in tax legislation even to legislate for groups. There may be individuals who are in the same position. For example, a mining engineer—not necessarily a coal mining engineer—might run a business that involves hazardous work. He might feel that he wishes to retire and pass on his business because of the nature of the work. Why should such a person be excluded because we have defined groups in our legislation?

Mr. Nicholas Ridley: What objections were there to the decision to make a special group of North Sea oil divers?

Mr. Davies: There were good arguments both ways on the issue, which was not clear-cut. I am saying that we should not necessarily legislate for groups. I am saying that there may be many people who do not form recognised classes, groups or categories but who engage in hazardous businesses and would wish to have the benefit of the relief.

Mr. Henderson: Name them.

Mr. Davies: I do not know them. We cannot name them. That is why we cannot legislate for individuals or groups of individuals.
The only way to deal with the problem is by considering the age that is provided. If there is a good case for saying that the age of 65 years is too high, consideration can be given to fixing a different age.
With respect to the hon. Member for Blaby (Mr. Lawson), I do not think that we can proceed by reference to ill health. That would involve a definition of ill health. How much ill health would count? What ill health would qualify for the relief? Such a definition would make these matters extremely difficult.
The hon. Member for Aberdeenshire, East said that Scottish fishermen and fishermen in general might not be able to pass on their boats from father to son—I accept that the boat is probably the major asset—because of capital gains tax. However, clause 38, which deals with relief on the transfer of business assets, has the effect of relieving from capital gains tax that sort of transfer. There may be one or two marginal cases, but we have dealt substantially with that issue.
I accept that the value of a fishing boat is quite high, and I accept that, prima facie, there may be a charge to capital gains tax if the owner of a boat wants to pass on his business, including the boat, to his son. However, clause 38 meets that point, and in almost all such cases there would not be a charge to capital gains tax.
The problem arises if a boat is sold on retirement. The capital gains tax provisions would apply if the owner retired


at the age of 55 years and sold his boat. However, that is not the case that we are discussing. The result of clause 38 is that the family venture or business is not hampered when it is wished to retain the asset and the business in the family. I can give the hon. Gentleman the reassurance that we have gone some way generally to meet his argument.
I do not believe that we can introduce general relief into tax legislation. The difficulty is not necessarily that of definition but of identifying groups and leaving out other groups and individuals who do not fall within the definition but who are deserving cases. If there is to be any relief along these lines, there will have to be general consideration of the retirement age. As society changes its views on these matters, no doubt the retirement age will be considered from time to time.
It is for those reasons that I cannot accept amendment no. 36.

Amendment agreed to.

Amendments made: No. 24, in page 31, line 40, leave out from 'retirement)' to end of line 7 on page 32 and insert
there shall be substituted the following subsections:—
(1) If an individual who has attained the age of 60 years—

(a) disposes by way of sale or gift of the whole or part of a business, or
(b) disposes by way of sale or gift of shares or securities of a company,

and throughout a period of at least one year ending with the disposal the relevant conditions have been fulfilled, relief shall be given under this section in respect of gains accruing to him on the disposal.

(1A) For the purposes of subsection (1) above the relevant conditions are fulfilled at any time if at that time,—

(a) in the case of a disposal falling within paragraph (a) of that subsection, the business in question is owned either by the individual or by a company with respect to which the following conditions are at that time fulfilled, namely,—

(i) it is a trading company;
(ii) it is the individual's family company; and
(iii) he is a full-time working director of it; and

(b) in the case of a disposal falling within paragraph (b) of that subsection, either the conditions in sub-paragraph (i) to (iii) of paragraph (a) above are fulfilled with respect to the company in question or the individual owns the business which, at the time of the disposal, is owned by the company;


and in relation to a particular disposal the period, up to a miximum of 10 years, which ends with the disposal and throughout which the relevant conditions are fulfilled is in this section referred to as 'the qualifying period'.

(1B) The amount available for relief under this section shall be,—

(a) in the case of an individual who has attained the age of 65 years, the relevant percentage of £50,000; and
(b) in the case of an individual who has not attained that age, the relevant percentage of the aggregate of £10,000 for every year by which his age exceeds 60 and a corresponding part of £10,000 for any odd part of a year;

and for the purpose of this subsection 'the relevant percentage' means a percentage determined according to the length of the qualifying period on a scale rising arithmetically from 10 per cent. where that period is precisely one year to 100 per cent. where it is ten years."'.

No. 25, in page 32, line 22, at end insert:
'(2A) In subsection (4) of that section (application of relief) for the words "subsection (1) above" there shall be substituted the words "this section" and the words "within that subsection" shall be omitted.'—[Mr. Denzil Davies.]

Mr. Denzil Davies: I beg to move amendment no. 28, in page 32, line 22, at end insert:
'(2A) In subsection (6) of that section, in paragraph (b) of the definition of "family company" for the words "seventy-five per cent." there shall be substituted the words "fifty-one per cent." and for the words "ten per cent." there shall be substituted the words "five per cent.".'.
The amendment modifies the definition of "family company" in section 34(6) of the Finance Act 1965, which is used for the purpose of the capital gains tax retirement relief. The clause therefore applies automatically to the roll-over relief for gifts of business assets in clause 38.
In Standing Committee the hon. Members for Chichester (Mr. Nelson) and Norfolk, South (Mr. MacGregor) tabled amendments with the aim of extending clause 37, which is now clause 38, to cover gifts of shares in a trading company in which the transferor had a material interest. Another amendment was tabled in relation to material interest. The Chief Secretary rejected that amendment but gave a commitment that he would meet the point in the earlier amendment. The amendment meets my right hon. Friend's undertaking.

Mr. John Wakeham: We welcome the amendment to redefine the definition of a family company and confirm that in our opinion it is a much better definition than that which was put before the Standing Committee. As the right hon. Gentleman has said, the issue was raised in Standing Committee. We are grateful to him for fulfilling the undertaking that was given by the Chief Secretary.
In many instances the definition will be fine, especially for businesses that are controlled by one family. I confirm that what has been done meets strictly the undertaking that was given. However, it will not cover some instances that many of us think it should cover—for example, family businesses that are controlled by several families, three or four families being in partnership together. That is the sort of family company that might well own a fishing boat, a subject that we were only recently discussing. Those businesses, if they were partnerships, would get relief that they do not get as family companies. These are examples that are likely to become more and more common in future, especially when professional people, or people with high skills, go into a business with a high degree of technology.
If three or four highly skilled people join together to set up a company, they will, because of the better definition that is before us but which is still not a wide enough definition, not be able to get the exemption. In welcoming the amendment and in confirming that it meets the undertaking, I am certain that we shall have to return to this topic again for further changes in the years to come.

Amendment agreed to.

Clause 41

RELIEF IN RESPECT OF LOANS TO TRADERS

6.0 p.m.

Mr. Graham Page: I beg to move amendment no. 182, in page 32, line 29, after 'trade', insert
'(other than that of a solicitor)'.
I must at once admit an interest, but an interest on behalf of the young entrants to my profession. Clause 41 is welcome in giving relief in respect of loans which

the borrower fails to repay. The relief is specified in subsection (2):
If, on a claim by a person who has made a qualifying loan
—the lender who has made the loan—
the inspector is satisfied that—
(a) any oustanding amount of the principal of the loan has become irrecoverable
it can become an allowable loss equal to the amount that
had accrued to the claimant when the claim was made.
The difficulty is the definition of the qualifying loan. That occurs in subsection (1):
In this section 'a qualifying loan' means a loan in the case of which—
(a) the money lent is used by the borrower wholly for the purposes of a trade carried on by him, not being a trade which consists of or includes the lending of money".
I should like to deal with the word "trade". As the clause stands, trade would not include a profession or vocation. A later amendment will alter that, so I am anticipating acceptance of that later amendment, that "trade" will include a profession. Therefore, it would include the profession of a solicitor.
In the solicitors' profession it is normal to accommodate clients with loans in order, for example, to bridge the gap between the purchase of one house and the sale of another. Frequently, solicitors assist clients with short-term loans in that way. It is not a major part of the practice, but it would certainly come within the definition that the trade or profession includes the lending of money.
I put some of these points to the Minister in Committee. I appreciate that those words are necessary for the generality of borrowers. Obviously, a qualifying loan should not be a loan to enable the borrower to relend it or to go into the business of relending it, but if the clause remains unamended it will mean that the young solicitor who may wish to borrow capital to start in practice will not be as sure a borrower as anyone else setting up in trade. If the lender took the trouble to read this legislation, he might say "This is a profession in which money is sometimes lent to clients. Therefore, it includes the lending of money. If this young solicitor should fail and not return the money, I shall not be able to treat this loan as an allowable loss." Therefore, he would


hesitate to lend the young solicitor the money to set up in practice.
I do not want young entrants to my profession to be put in that difficulty. Therefore, I propose this amendment, which would insert after "trade"
(other than that of a solicitor)".
It is a narrow amendment. It cannot possibly open the floodgates to any avoidance of tax. I am sure that it will be of great assistance to the young in a profession which does not go in for the business of lending money. There can be no cheating of the Inland Revenue, as there might be if we removed the words altogether. I suggest that making this slight exception can do no harm to the Inland Revenue.

Mr. Denzil Davies: The right hon. Member for Crosby (Mr. Page) raised this matter in Committee, and he has pursued it on the Floor of the House.
I wrote to the right hon. Gentleman explaining why it was necessary to deny the relief in the clause for money lending in general. I think that he accepted the reasons for that. I understand that he seeks to safeguard the position of a solicitor being thought to be carrying on the trade of lending money. That is where the difference between us lies. As I said in Committee upstairs, I do not believe—indeed, there is authority—that the lending of money by a solicitor in the way described by the right hon. Gentleman is the carrying on of the trade of lending money. There are apparently two tax cases on the books which represent authority for that proposition.
At the end of the day it must be a question of fact, but I should say that most solicitors engaged in lending as an incidental part of their profession are not carrying on the trade of lending money. Indeed, if a solicitor establishes himself as carrying on the trade of lending money—if that is possible for a professional person—I do not see why he should get the relief in the clause. I think that the right hon. Gentleman agrees with that.
The right hon. Gentleman seems to think that the incidental lending of money by solicitors means that they come within the clause, in the sense that their profession includes the lending of money. There is nothing to fear here. It will

be exceptional for it to be said that the profession includes the lending of money when the solicitor is merely lending money incidental to his business. For that reason, I cannot accept special relief in the Bill for this group.

Mr. Peter Rees: It has always been a matter of surprise to me that debts, other than debts on a security, have been excluded from capital gains tax, particularly the reliefs for losses under capital gains tax. But there it is, and I should not be in order if I were to widen the debate to raise that matter.
The Opposition were glad to see clause 41 in the Bill. The motives which led the Government to introduce it are perhaps slightly suspect. However, I do not want to reopen the debate that we had yesterday on the reliefs for small businesses.
My right hon. Friend the Member for Crosby (Mr. Page), as one would suspect, made a small but important point. The Minister of State has not entirely satisfied me with his reply. He referred to two cases. I do not think that they establish the point that he endeavoured to make. It is true that a solicitor will not, in other than exceptional circumstances, be regarded as a money lender. The point is that this provision excludes moneys lent to people whose trade consists of or includes the lending of money. As "trade" is to be defined, if the House accepts amendment no. 14 in the name of the Chancellor of the Exchequer, it will include "profession".
I do not believe that any of the cases to which the Minister of State has been referred by his assiduous advisers establish that the profession of a solicitor does not include, even though it is a subsidiary aspect of his profession, the lending of money. My right hon. Friend made a very good point.
I know that the Minister of State is open-minded on these matters. I should not be disposed to encourage my right hon. Friend, if he needs encouragement or discouragement, to press the amendment to a Division. However, I ask the Minister of State to go back to his advisers in the hope that they may be disposed to take advice from one of the Law Officers on the precise scope of clause 41(1)(a). If they feel that there is any merit in this proposition, as I do—I was persuaded by my right hon.


Friend's argument—I hope that the Minister of State, at least informally, will say that he will introduce a remedial measure in the next Finance Bill if he is fortunate or unfortunate enough to be commending it to the House.

Mr. Graham Page: I cannot say that I am satisfied with the answer by the Minister of State. I hope that he will look into this matter again to see whether he can allow this very narrow except ion.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Denzil Davies: I beg to move amendment no. 14, in page 32, line 37, at end insert—
'(2) In subsection (1) above references to a trade include references to a profession or vocation; and where money lent to a company is lent by it to another company in the same group, being a trading company, that subsection shall apply to the money lent to the first-mentioned company as if it had used it for any purpose for which it is used by the other company while a member of the group.'.

Mr. Deputy Speaker: With this we may take Government amendments nos. 15, 16, 17 and 18.

Mr. Davies: These amendments are in two groups. Amendments nos. 14, 17 and 18 implement three undertakings which I gave in Committee. Amendment no. 14 extends the scope of a qualifying loan to include money lent to a borrower who uses it for the purposes of a profession or vocation carried on by him. It also extends the clause to include money lent to a company which, in turn, lends it to a trading company in the same group. Amendment no. 17 provides for relief for a member of a group which guarantees a loan made to a trading member of the same group by a person who is not a member of that group. Amendment no. 18 gives the necessary definition of a trading company. These three amendments meet commitments which I made in Committee.
Amendments nos. 15 and 16 deal with points raised in Committee by the hon. Member for Hitchin (Mr. Stewart). He asked whether the relief was due for a guaranteed payment in respect of the irrecoverable amount of a debt and a security. Amendment no. 15 achieves that result by including a debt and a

security for a qualifying loan for the purposes of relief for guaranteed payments. The hon. Member also argued that relief should be given for guaranteed payments in respect of irrecoverable interest as well as for the principal of the loan. I accepted that argument in Committee, and amendment no. 16 fulfils the undertaking that I then gave.

Mr. Graham Page: My hon. Friend the Member for Hitchin (Mr. Stewart) has asked me to apologise for his not being present. He is engaged on other parliamentary business in the precincts of the Chamber. On his behalf, I thank the Minister in particular for introducing amendments nos. 14, 15 and 16 for which my hon. Friend pressed.
My hon. Friends and I were eager that these amendments should be made. We are grateful that they have been redrafted. Last night I began to count the score of goals. We have scored another five in this group of amendments. We are grateful for the concessions.

Mr. Deputy Speaker: The right hon. Member for Crosby (Mr. Page) will be playing in the World Cup football match when next it is played.

Amendment agreed to.

Amendments made: No. 15, in page 33, line 8, after 'of', insert
'a loan which is, or but for subsection (1)(c) above would be,'.

No. 16, in page 33, line 9, after first 'of', insert
', or of interest in respect of,'.

No. 17, in page 33, line 22, leave out 'or' and insert
'and the claimant and the lender were not'.

No. 18 in page 34, line 25, after '1965)', insert ',
trading company" has the meaning given by paragraph 11 of Schedule 16 to the Finance Act 1972 '.—[Mr. Denzil Davies.]

Schedule 8

PROFIT SHARING SCHEMES

Amendment made: No. 86, in page 74, line 14, at end insert—
'(1A) Where the company concerned has control of another company or companies. The scheme may be expressed to extend to all or any of the companies of which it has control; and in this Schedule a scheme which is expressed so to extend is referred to as a "group


scheme" and, in relation to a group scheme, the expression "participating company" means the company concerned or a company of which for the time being the company concerned has control and to which for the time being the scheme is expressed to extend.'.—[Mr. Denzil Davies.]

Mr. Robert Sheldon: I beg to move amendment no. 87, in page 74, line 18, at end insert:
or, in the case of a group scheme, by a participating company'.

Mr. Deputy Speaker: With this we may discuss Government amendments nos. 88, 89, 84 and 158.

6.15 p.m.

Mr. Sheldon: Amendment no. 87 makes it possible for a controlling company to set up one scheme for all companies that are subordinate to the holding company. The intention is that where a profit-sharing scheme is created the holding company will not need to have profit-sharing schemes for each of the subsidiary companies.
This represents a commitment given in Committee to the hon. Member for Norfolk, South (Mr. MacGregor. We accepted his argument that it would put a great deal of work on groups of companies if each company in the group had to set up its own individual profit-sharing scheme.
The amendments will make it possible for a controlling company to set up a single profit-sharing scheme within the group of which all the subsidiary companies can make use if they wish. The amendments provide useful flexibility and I am happy to accept the arguments in favour of them.

Mr. John MacGregor: This is one of the many amendments which we proposed in Committee to try to remove some of the administrative complications and tight restrictions on profit-sharing schemes. Our view, and that of many companies, was that to insist on a series of schemes in a group of companies would be restrictive and would add greatly to their administrative burden. I welcome the Financial Secretary's honouring of the commitment that it would be possible to introduce a single group scheme.

Amendment agreed to.

Mr. Ridley: I beg to move amendment no. 41, in page 74, line 39, leave out 'a full-time' and insert 'an'.

Mr. Deputy Chairman (Mr. Oscar Murton): With this we may discuss amendment no. 42, in page 74, line 40. after 'concerned', insert
'and spends more than half his working time working for it'.

Mr. Ridley: This amendment covers a new point. In part, I seek clarification through it. The amendment involves the definition of "full-time employee". What does "full-time" mean? Does it mean that a person has to be working for a certain proportion of the week or all the week, or is it possible for a person to work part-time for one company and part-time for another company? There is no definition of "full-time".
The Financial Secretary owes it to us to give a definition, because this could cause trouble. It is unfortunate that we cannot seek to amend the schedule in any other direction. If the Financial Secretary will comment, it will be helpful to all those who administer the schemes. The schedule reads:
is then a full-time employee or director of the company".
Does the director have to be full-time or not? It is not clear from the drafting. I should have thought that if a person was allowed to be a part-time director, as many people are, the words would be "or a director". I shall be grateful if the Financial Secretary will clear that up.
I do not feel tremendously committed to the terms of my amendment, because upon consideration I believe that it is a good idea that those who principally work for a company, although they might have other activities and work for a number of different companies, should be able to participate. The meaning of "full-time" is not clear.

Mr. Robert Sheldon: The amendment seeks clarification of the definition of a full-time employee. I shall give the explanation as well as I can, but there is no real need to define a full-time employee. That is because there is nothing in the schedule to stop a company from including part-timers in its profit-sharing scheme. Provided that all full-timers with five years' service are eligible.


full-timers can be defined in any way suitable to the company and its employees. The important aspect is that a scheme has to be open to all full-time employees.
In the next amendment we shall deal with the question of the requirement that each of the employees should be able to join these schemes on similar terms. That prescribes that there should be no discrimination in favour of or against any employee. There is no need for this amendment on the definition of "full-time employee". It is for the company to provide a definition. That is the most suitable way in which to proceed.

Mr. John Pardoe: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has raised a point that we did not cotton on to in Standing Committee. If it is true—and it is a highly attractive thought—that part-time directors and part-time employees of two different companies—I go no further than two at this stage—can participate in profit-sharing schemes run by both companies, can they have up to £500 of shares from each, or is there a limit of £500 per person? Or would such a person have to take part of the £500 from one company and part from the other?

Mr. Ridley: I am scarcely rising to assist the Financial Secretary to get the answer to his question. The hon. Member for Cornwall, North (Mr. Pardoe) should not limit his question to those who are working part-time only for two companies. We know of some people who are part-time directors of up to 50 companies. Are they also eligible for joining 50 private schemes?

Mr. Pardoe: I stressed that I was going only as far as two companies, but the hon. Member is perfectly right. The mind boggles at the opportunities for getting £500 each from a large number of companies.

Mr. Lawson: My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has raised an important new point which, in spite of the exhaustive discussions we had in Committee, did not arise then. The point has been further elaborated by the hon. Member for Cornwall, North (Mr. Pardoe).
As I understood the Financial Secretary, he was saying that there was no need for a definition of "full-time" or part-time but it was entirely up to the company to say which applied because the company could perfectly well include part-time employees in its scheme. If that is so, it is difficult to see why the words "full-time" occur in the schedule. The only reason must be that while, according to the Financial Secretary's logic, it is true that part-time employees may be included, they may also be excluded, whereas full-time employees may not be excluded.
If that is the case, we need a definition of full-time and part-time employees. It clearly cannot be up to the firm to decide the law of the land. It is the law of the land, if the Bill reaches the statute book, which determines that full-time employees may not be excluded from such a scheme while part-time employees may be excluded. The point needs a little more explanation from the Financial Secretary.

Mr. Robert Sheldon: On the point raised by the hon. Member for Cornwall, North (Mr. Pardoe), I should explain that paragraph 3 of schedule 8 provides for a £500 limit for any participant in a tax year. That is the total sum for each individual.
The correct way for dealing with full-time employees under profit-sharing schemes is that they have to be included in a scheme if they have five years' service with the company. It is not for us to define "full-time". That will depend on the operations of a particular company, and it should be for the company to decide. Why should we limit or restrict it? The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has not made a case for excluding certain employees.
We should like to include as many employees as possible, and to exclude them only for the reasons I have stated where preferential terms may be offered to certain individuals. As long as companies comply with that obligation, we think that it is right to give them the choice to decide for themselves who should be eligible.

Mr. Lawson: The Financial Secretary has not quite met the point. The Government have very carefully said that it would be wrong to have a scheme which


provided that some employees could participate while others could not. They have therefore carefully said that it would be wrong to have any kind of an exclusive scheme. Now they are saying that it is possible for there to be exclusion—namely, the exclusion of part-time employees. Nowhere, however, have they defined "part-time employees". The Financial Secretary says blithely that it is entirely up to the company, but if that is so he has torpedoed the universality that he has attempted to write into the Bill.

Mr. Graham Page: It is not clear from the wording of paragraph 2(a) that it intends the director to be full- or part-time. It reads
full-time employee or director".
If, as has been suggested, he is a director of a number of companies, is he full-time in all of them or part-time in each? That is not an extraordinary state of affairs. I declare, as is shown in the Register of Members' Interests, that I am a director of 30 companies. They are all subsidiaries of one company, and, although it looks as though I am considerably important, I am not. If one turns over the page in the register, one can see the names of other hon. Members whom one knows to have far more trading interests than I but who have nothing against their names. No doubt they have very efficient wives.
It is not fanciful, therefore, to suggest that any of us may be directors of a number of companies. Could we then enter into the schemes of each of those companies? Then comes the question of what is a full-time employee. A scheme must provide cover for all full-time employees. Suppose that a company employed people working a 40-hour week and others working for 35 hours. Are those on 35 hours part-time or full-time employees, given that the other employees are working 40 hours?
Finally comes the point about whether anyone can obtain the relief in respect of the £500. The Financial Secretary quoted paragraph 3 of schedule 8, which reads
The scheme must provide that the total of the initial market values of the shares appropriated to any one participant in a year of assessment will not exceed £500.
But that refers only to what a scheme does, not to what the participant may he allotted in some other scheme. The

scheme referred to here is that set up by the company in which a person is employed. Perhaps we are going round in a circle, because if a person is employed full-time in one company it might be that he cannot be employed full-time in another and, therefore, cannot participate in more than one scheme. However, if he can be employed full-time as a director in 30 or 50 different companies, does that mean that he can take part in 30 or 50 different schemes?

6.30 p.m.

Mr. Ridley: The Financial Secretary said that paragraph 2 relates only to eligibility, and that all full-time employees must be able to join the scheme. However, he said clearly that all part-timers would be able to join the scheme. The condition here is that the scheme will not be passed unless everybody who is full-time is eligible. There is, therefore, no doubt from what the Minister says that any part-timer can join, which means, as my right hon. Friend the Member for Crosby (Mr. Page) said, that under sub-paragraph (3) one may have as many of these positions as one likes if one can be made a part-timer in a number of companies.

Mr. Graham Page: My perspicacity had not gone as far as that. My hon. Friend is undoubtedly right, that part-timers can join a scheme. They can, therefore, join any scheme and any number of schemes and thereby become participators and be entitled to the £500-worth of shares.
I do not know what we can do at this stage to amend those words or get the schedule right. I suppose that we could have an undertaking that there will be an amending Act in future. I do not think that there is any power under the schedule to amend it by order. All that can be done is to have some extra-statutory concessions or directions from the Inland Revenue, which the majority of us on this side dislike immensely. Nevertheless, it may be a way out—if "extra-statutory concession" describes properly what the Government intend in this part of the schedule.

Mr. Robert Sheldon: As I said, no individual is allowed to have more than £500-worth of shares in any tax year, irrespective of the number of schemes in which he is involved.

Mr. Ridley: Where does it say that?

Mr. Sheldon: Clause 47 deals with that point.
As I said, the allowance is £500 per person, and it applies to full-time employees, who have to be in the scheme. Part-timers may be in the scheme.
I was asked for a definition. There was a definition under the Conservative 1972 scheme, where "full-time" was defined as
required to devote substantially the whole of his time to service as a director or employee".
That is a little rigid and I prefer to keep it more flexible. There may be abuses, but I hope that they will not arise and I prefer companies to have the option of arranging the matter in the way which suits them best. If it turns out that the system is not working satisfactorily, we can always return to it.
I was asked about directorships. Full-time directors are in the same position as full-time employees. A part-time director of several companies in a group—that is perhaps what the right hon. Member for Crosby (Mr. Page) had in mind—will be working full time for the group as a whole.
I prefer to leave this provision as it is. We have the opportunity to return to it if there any difficulties, but our first method of approach should be flexibility unless there is convincing reason for not allowing it.

Mr. Ridley: The Financial Secretary has cleared up the point raised by the hon. Member for Cornwall, North (Mr. Pardoe)

about how many times someone may collect £500-worth of shares if he is part-time. That was helpful, but I am not satisfied on the main point of the amendment.

If a company can decide which of its employees and directors are full time, it can squeeze out those it decides are part time. I know that this paragraph deals only with eligibility, but at the same time it gives a company the right to say that a certain group who may work eight hours on day shift are full time and another group who work seven hours on night shift are part time, and it has the right not to make the part-timers an offer of participation.

A row could easily happen in a private company between shareholders and directors—this is common in vexatious situations—and, to spite a minority shareholder, the majority could exclude him by some device of this sort.

This should have been defined. It is a genuine slip, I believe, and by agreeing to amendment no. 41 but not pressing amendment no. 42 we can put it right. It would then be necessary for the company to demonstrate that the scheme was open to all its employees and directors, whether part-time or full-time. Since that is the Government's objective, I think that we should back it. I hope that my right hon. and hon. Friends will support the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 238, Noes 255.

Division No. 267]
AYES
[6.36 p.m.


Aitken, Jonathan
Brotherton, Michael
Dykes, Hugh


Alison, Michael
Brown, Sir Edward (Bath)
Eden, Rt Hon Sir John


Amery, Rt Hon Julian
Bryan, Sir Paul
Edwards, Nicholas (Pembroke)


Atkins, Rt Hon H. (Spelthorne)
Buchanan, Richard
Elliott, Sir William


Atkinson, David (B'mouth, East)
Buchanan-Smith, Alick
Emery, Peter


Awdry, Daniel
Buck, Antony
Eyre, Reginald


Baker, Kenneth
Budgen, Nick
Fairbairn, Nicholas


Banks, Robert
Bulmer, Esmond
Farr, John


Bell, Ronald
Burden, F. A.
Fell, Anthony


Bendall, Vivian
Butler, Adam (Bosworth)
Finsberg, Geoffrey


Bennett, Dr Reginald (Fareham)
Chalker, Mrs Lynda
Fisher, Sir Nigel


Benyon,W.
Channon, Paul
Fletcher, Alex (Edinburgh N)


Berry, Hon Anthony
Churchill, W. S.
Fletcher-Cooke, Charles


Biffen, John
Clark, Alan (Plymouth, Sutton)
Fookes, Miss Janet


Biggs-Davison, John
Clark, William (Croydon S)
Forman, Nigel


Body, Richard
Cooke, Robert (Bristol W)
Fox, Marcus


Boscawen, Hon Robert
Cope, John
Galbraith Hon T. G. D.


Bottomley, Peter
Cormack, Patrick
Gardiner, George (Reigate)


Bowden, A. (Brighton, Kemptown)
Costain, A. P.
Gardner, Edward (S Fylde)


Boyson, Dr Rhodes (Brent)
Crowder, F. P.
Glyn, Dr Alan


Bradford, Rev Robert
Dean, Paul (N Somerset)
Godber, Rt Hon Joseph


Braine, Sir Bernard
Dodsworth, Geoffrey
Goodhart, Philip


Brittan, Leon
Drayson, Burnaby
Goodlad, Alastair


Brocklebank-Fowler, C.
du Cann, Rt Hon Edward
Gorst, John


Brooke, Hon Peter
Durant, Tony
Gow, Ian (Eastbourne)




Gower, Sir Raymond (Barry)
Macfarlane, Neil
Ridsdale, Julian


Grant, Anthony (Harrow C)
MacGregor, John
Rifkind, Malcolm


Grieve, Percy
MacKay, Andrew (Stechford)
Roberts, Wyn (Conway)


Griffiths, Eldon
Macmillan, Rt Hon M. (Farnham)
Rodgers, Sir John (Sevenoaks)


Grylls, Michael
McNair-Wilson, M. (Newbury)
Rost, Peter (SE Derbyshire)


Hamilton, Archibald (Epsom &amp; Ewell)
McNair-Wilson, P. (New Forest)
Royle, Sir Anthony


Hamilton, Michael (Salisbury)
Madel, David
Sainsbury, Tim


Hampson, Dr Keith
Marshall, Michael (Arundel)
St. John-Stevas, Norman


Hannam, John
Marten, Neil
Scott, Nicholas


Harrison, Col Sir Harwood (Eye)
Mates, Michael
Scott-Hopkins, James


Harvie Anderson, Rt Hon Miss
Mather, Carol
Shaw, Giles (Pudsey)


Haselhurst, Alan
Maude, Angus
Shaw, Michael (Scarborough)


Havers, Rt Hon Sir Michael
Maudling, Rt Hon Reginald
Shelton, William (Streatham)


Hawkins, Paul
Maxwell-Hyslop, Robin
Shepherd, Colin


Heyhoe, Barney
Mayhew, Patrick
Shersby, Michael


Heath, Rt Hon Edward
Meyer, Sir Anthony
Sims, Roger


Higgins, Terence L.
Miller, Hal (Bromsgrove)
Sinclair, Sir George


Hodgson, Robin
Mills, Peter
Skeet, T. H. H.


Holland, Philip
Miscampbell, Norman
Smith, Dudley (Warwick)


Hordern, Peter
Mitchell, David (Basingstoke)
Smith, Timothy John (Ashfield)


Howe, Rt Hon Sir Geoffrey
Moate, Roger
Speed, Keith


Howell, David (Guildford)
Moore, John (Croydon C)
Spence, John


Howell, Ralph (North Norfolk)
More, Jasper (Ludlow)
Spicer, Jim (W Dorset)


Hunt, David (Wirral)
Morgan, Geraint
Spicer, Michael (S Worcester)


Hunt, John (Ravensbourne)
Morgan-Giles, Rear-Admiral
Sproat, Iain


Hurd, Douglas
Morris, Michael (Northampton S)
Stainton, Keith


Hutchison, Michael Clark
Morrison, Charles (Devizes)
Stanbrook, Ivor


Irving, Charles (Cheltenham)
Morrison, Hon Peter (Chester)
Stanley, John


James, David
Neave, Airey
Steen, Anthony (Wavertree)


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Nelson, Anthony
Stewart, Ian (Hitchin)


Jessel, Toby
Neubert, Michael
Stokes, John


Johnson Smith, G. (E. Grinstead)
Newton, Tony
Stradling Thomas, J.


Jones, Arthur (Daventry)
Normanton, Tom
Tapsell, Peter


Jopling, Michael
Nott, John
Taylor, Teddy (Cathcart)


Joseph, Rt Hon Sir Keith
Onslow, Cranley
Tebbit, Norman


Kaberry. Sir Donald
Osborn, John
Thatcher, Rt Hon Margaret


Kellett-Bowman, Mrs Elaine
Page, John (Harrow West)
Thomas, Rt Hon P. (Hendon S)


Kilfedder, James
Page, Rt Hon R. Graham (Crosby)
Townsend, Cyril D.


Kimball, Marcus
Page, Richard (Workington)
Trotter, Neville


King, Evelyn (South Dorset)
Parkinson, Cecil
van Straubenzee, W. R.


King, Tom (Bridgwater)
Pattie, Geoffrey
Vaughan. Dr Gerard


Kitson, Sir Timothy
Percival, Ian
Viggers, Peter


Knight, Mrs Jill
Peyton, Rt Hon John
Wakeham, John


Knox, David
Pink, R. Bonner
Walder, David (Clitheroe)


Lamont, Norman
Prentice, Rt Hon Reg
Walker, Rt Hon P. (Worcester)


Langford-Holt, Sir John
Price, David (Eastleigh)
Walker-Smith, Rt Hon Sir Derek


Latham, Michael (Melton)
Prior, Rt Hon James
Warren, Kenneth


Lawrence,Ivan
Pym, Rt Hon Francis
Weatherill, Bernard


Lawson, Nigel
Raison, Timothy
Whitney, Raymond


Le Marchant, Spencer
Rathbone, Tim
Wiggin, Jerry


Lester, Jim (Beeston)
Rees, Peter (Dover &amp; Deal)
Winterton, Nicholas


Lewis, Kenneth (Rutland)
Rees-Davies, W. R.
Wood. Rt Hon Richard


Lloyd, Ian
Renton, Rt Hon Sir D. (Hunts)



Loveridge, John
Renton, Tim (Mid-Sussex)
TELLERS FOR THE AYES


Luce, Richard
Rhodes James, R.
Sir George Young and


McCrindle, Robert
Ridley, Hon Nicholas
Lord James Douglas-Hamilton.


NOES


Abse, Leo
Callaghan, Jim (Middleton &amp; P)
Davis, Clinton (Hackney C)


Allaun, Frank
Campbell, Ian
Deakins, Eric


Archer, Rt Hon Peter
Canavan, Dennis
Dean, Joseph (Leeds West)


Armstrong, Ernest
Carmichael, Neil
de Freitas, Rt Hon Sir Geoffrey


Ashley, Jack
Carter, Ray
Dell, Rt Hon Edmund


Atkins, Ronald (Preston N)
Carter-Jones, Lewis
Dempsey, James


Atkinson, Norman (H'gey, Tott'ham)
Cartwright, John
Dewar, Donald


Bagier, Gordon A. T.
Castle, Rt Hon Barbara
Doig, Peter


Bates, Alf
Clemitson, Ivor
Dormand, J. D.


Bean, R. E.
Cocks, Rt Hon Michael (Bristol S)
Douglas-Mann, Bruce


Bidwell, Sydney
Cook, Robin F. (Edin C)
Dunnett, Jack


Bishop, Rt Hon Edward
Corbett, Robin
Dunwoody, Mrs Gwyneth


Blenkinsop, Arthur
Cowans, Harry
Eadie, Alex


Booth, Rt Hon Albert
Cox, Thomas (Tooting)
Edwards, Robert (Wolv SE)


Boothroyd, Miss Betty
Craigen, Jim (Maryhill)
Ellis, John (Brigg &amp; Scun)


Bottomley, Rt Hon Arthur
Crawshaw, Richard
English, Michael


Boyden, James (Bish Auck)
Cronin, John
Evans, Fred (Caerphilly)


Bradley, Tom
Crowther, Stan (Rotherham)
Evans, Gwynfor (Carmarthen)


Bray, Dr Jeremy
Cryer, Bob
Evans, John (Newton)


Broughton, Sir Alfred
Cunningham, G. (Islington S)
Ewing, Harry (Stirling)


Brown, Hugh D. (Provan)
Cunningham, Dr J. (Whiteh)
Fernyhough, Rt Hon E.


Brown, Robert C. (Newcastle W)
Dalyell, Tam
Fitch, Alan (Wigan)


Brown, Ronald (Hackney S)
Davidson, Arthur
Flannery, Martin


Buchan, Norman
Davies, Bryan (Enfield N)
Fletcher, Ted (Darlington)


Buchanan, Richard
Davies, Rt Hon Denzil
Foot, Rt Hon Michael


Callaghan, Rt Hon J. (Cardiff SE)
Davies, Ifor (Gower)
Fowler, Gerald (The Wrekin)







Fraser, John (Lambeth, N'w'd)
MacFarquhar, Roderick
Ryman, John


Freeson, Rt Hon Reginald
McGuire, Michael (Ince)
Sandelson, Neville


Freud, Clement
MacKenzie, Rt Hon Gregor
Sever, John


Garrett, John (Norwich S)
McMillan, Tom (Glasgow C)
Shaw, Arnold (Ilford South)


Garrett, W. E. (Wallsend)
McNamara, Kevin
Sheldon, Rt Hon Robert


George, Bruce
Madden, Max
Shore, Rt Hon Peter


Gilbert, Rt Hon Dr John
Magee, Bryan
Short, Mrs Renée (Wolv NE)


Ginsburg, David
Mahon, Simon
Silkin, Rt Hon John (Deptford)


Golding, John
Mallalieu, J. P. W.
Silkin, Rt Hon S. C. (Dulwich)


Gould, Bryan
Marshall, Dr Edmund (Goole)
Silverman, Julius


Gourlay, Harry
Marshall, Jim (Leicester S)
Skinner, Dennis


Graham, Ted
Maynard, Miss Joan
Smith, Cyril (Rochdale)


Grocott, Bruce
Meacher, Michael
Smith, Rt. Hon. John (N Lanarkshire)


Hamilton, James (Bothwell)
Mikardo, Ian
Snape, Peter


Hamilton, W. W. (Central Fife)
Millan, Rt Hon Bruce
Spearing, Nigel


Hardy, Peter
Miller, Dr M. S. (E Kilbride)
Spriggs, Leslie


Harrison, Rt Hon Walter
Mitchell, Austin (Grimsby)
Stallard, A. W.


Hart, Rt Hon Judith
Mitchell, R. C. (Soton, Itchen)
Steel, Rt Hon David


Hattersley. Rt Hon Roy
Molloy, William
Stewart, Rt Hon M. (Fulham)


Healey, Rt Hon Denis
Moonman, Eric
Stoddart, David


Heffer, Eric S.
Morris, Alfred (Wythenshawe)
Stott, Roger


Hooley, Frank
Morris, Rt Hon J. (Aberavon)
Strang, Gavin


Horam, John
Mulley, Rt Hon Frederick
Summerskill, Hon Dr Shirley


Howell, Rt Hon Denis (B'ham, Sm H)
Murray, Rt Hon Ronald King
Swain, Thomas


Howells, Geraint (Cardigan)
Newens, Stanley
Taylor, Mrs Ann (Bolton W)


Hoyle, Doug (Nelson)
Noble, Mike
Thomas, Dafydd (Merioneth)


Huckfield, Les
Oakes, Gordon
Thomas, Jeffrey (Abertillery)


Hughes, Mark (Durham)
Ogden, Eric
Thomas, Mike (Newcastle E)


Hughes, Robert (Aberdeen N)
O'Halloran, Michael
Thomas, Ron (Bristol NW)


Hunter, Adam
Orme, Rt Hon Stanley
Thorne, Stan (Preston South)


Irvine, Rt Hon Sir A. (Edge Hill)
Ovenden, John
Tierney, Sydney


Irving, Rt Hon S. (Dartlord)
Owen, Rt Hon Dr David
Tilley, John


Jackson, Colin (Brighouse)
Padley, Walter
Tinn, James


Jackson, Miss Margaret (Lincoln)
Palmer, Arthur
Tomlinson, John


Janner, Greville
Pardoe, John
Torney, Tom


Jay, Rt Hon Douglas
Park, George
Urwin, T. W.


Jeger, Mrs Lena
Parker, John
Varley, Rt Hon Eric G.


Jenkins, Hugh (Putney)
Parry, Robert
Walker, Harold (Doncaster)


John Brynmor
Pavitt, Laurie
Walker, Terry (Kingswood)


Johnson, James (Hull West)
Pendry, Tom
Ward, Michael


Johnson, Walter (Derby S)
Penhaligon, David
Watkinson, John


Johnston, Russell (Inverness)
Phipps, Dr Colin
Weetch, Ken


Jones, Alec (Rhondda)
Prescott, John
Weitzman, David


Jones, Dan (Burnley)
Price, C. (Lewisham W)
Wellbeloved, James


Judd, Frank
Price, William (Rugby)
White, James (Pollok)


Kelley, Richard
Radice, Giles
Whitehead, Phillip


Kerr, Russell
Rees, Rt Hon Merlyn (Leeds S)
Whitlock, William


Kilroy-Silk, Robert
Richardson, Miss Jo
Willey, Rt Hon Frederick


Kinnock, Neil
Roberts, Albert (Normanton)
Williams, Rt Hon Alan (Swansea W)


Lambie, David
Roberts, Gwilym (Cannock)
Williams, Rt Hon Shirley (Hertford)


Lamond, James
Robertson, George (Hamilton)
Wilson, William (Coventry SE)


Latham, Arthur (Paddington)
Robinson, Geoffrey
Wise, Mrs Audrey


Leadbitter, Ted
Roderick, Caerwyn
Woodall, Alec


Lever, Rt Hon Harold
Rodgers, George (Chorley)
Woof, Robert


Lewis, Ron (Carlisle)
Rodgers, Rt Hon William (Stockton)
Wrigglesworth, Ian


Litterick, Tom
Rooker, J. W.
Young, David (Bolton E)


Loyden, Eddie
Rose, Paul B.



Luard, Evan
Ross, Stephen (Isle of Wight)
TELLERS FOR THE NOES:


Mabon, Rt Hon Dr J. Dickson
Ross, Rt Hon W. (Kilmarnock)
Mr. Donald Coleman and


McCartney, Hugh
Rowlands, Ted
Mr. Frank R. White.


McElhone, Frank

Amendment accordingly negatived.

Amendment made: No. 88, in page 74, line 40, after "concerned", insert
or, in the case of a group scheme, a participating company".—[Mr. Robert Sheldon.]

Mr. Robert Sheldon: I beg to move amendment no. 66, in page 74, line 47, at end insert—
(2) For the purposes of sub-paragraph (1) above, the fact that the number of shares to be appropriated to the participants in a scheme varies by reference to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that the participants are not eligible to participate in the scheme on similar terms.".
The amendment deals with those who are eligible for approved profit-sharing schemes and clarifies the words "on similar terms". It ensures that all employees are able to join profit-sharing schemes without any partiality being shown to certain of them.
Allowable schemes must be open to all employees on similar terms. This does not mean that the same number of shares has to be allocated to each of the employees. They can be apportioned on the basis of length of service or the salary of the employee, for instance.
What we want to avoid—this has been possible under previous schemes—is a position when £500 could be paid to one higher-paid employee and perhaps only £50 to another with almost the same salary. We want to avoid that type of discrimination. The amendment makes this clear and fulfils a commitment made by the Chief Secretary in Committee.

Mr. MacGregor: I am grateful for this amendment, which certainly clarifies what is meant by "on similar terms". As the Financial Secretary will recall, I pointed out during the Committee debate on schedule 8 that there was confusion among a number of people whether "on similar terms" meant that there had to be the same number of shares for each employee. Clearly, if that had been the case it would have been a considerable damper upon the value of profit-sharing schemes in many companies.
There was just one sentence which the Financial Secretary used in introducing the amendment which worried me. He said that the purpose of the amendment was to avoid the position which might arise when a company might wish to

discriminate between two employees on the same salary. I have welcomed the fact that in the profit-sharing schemes as a whole, as far as possible, discretion has been given to companies to interpret the schemes for themselves, ensuring that they best fit their own purposes. I am a little concerned if the Chief Secretary is hinting that the Inland Revenue will not approve schemes if there is any option for the company to give a different number of shares to employees on the same salary.

Mr. Robert Sheldon: I am sorry if I have misled the hon. Gentleman and did not make myself clear. The position is that, if one employee were to be given the opportunity of receiving substantially more when there were relatively small differences in salary between him and another employee, that would not be an approved scheme. It is approved as long as the conditions are the same. The membership of the approved schemes must be available on similar terms.

Mr. MacGregor: I would have preffered that that condition was not written into the approval to be given by the Inland Revenue. I can well see, given that this is not only a scheme to encourage people to have shares but is meant to encourage certain people in a company, that some companies may wish to discriminate between people on certain salaries. I would have preferred that that was left to the companies. I hope that the condition will be used with great discretion and flexibility by the Revenue.
By and large, I welcome the amendment because it removes uncertainty. It makes clear that people with different salaries will be entitled to different numbers of shares. There are two points to be made in that respect. As the Financial Secretary will recall, concern was expressed in Committee about the fact that the £500 limitation might be inadequate for middle to senior management. I remember my hon. Friend the Member for Chichester (Mr. Nelson) raising this point. I still have that concern to a certain extent. The amendment makes it clear that where a company can give only a certain amount of shares it will be able to give rather more to its middle to senior management. That is a help. We have to watch the operation


of these schemes carefully. If we find that the £500 limitation is too small for middle to senior management, I hope that it can be raised.
I have a question for the Financial Secretary. It is clear that there can be variability in the number of shares which individual employees can have, related to their salary. This means, particularly if, as we hope, these schemes grow, that they will eventually be regarded as part of the overall remuneration package given to employees. I remember that my hon. Friend the Member for Blaby (Mr. Lawson) made this point in our earlier debates.
I would expect that fairly soon such a scheme would be regarded as part of the overall remuneration package by many employees and, therefore, by the trade unions in their negotiations. We have read today in the newspapers that the Prime Minister is talking about a 5 per cent. limit next year in whatever pay policy is to come forward. Is it the Government's intention that these schemes will be regarded as part of any future pay policy, if there be one? If this is so, I believe that it will kill such schemes because it will mean that they will be unable to get off the ground. It is obvious that employees will be looking for an immediate return, shown up in their wage packet, from any pay policy. This means that there will be no scope for introducing these schemes in the immediate future.
Will these schemes be regarded at any time in the near future as part of the pay policy or will they, as I hope, be regarded as a long-term incentive for employees and, therefore, separate from pay policy?

Mr. Nelson: I support the comments of my hon. Friend the Member for Norfolk, South (Mr. MacGregor) and give a cautious welcome to this amendment, which follows assurances given in Committee. It helps to clarify the situation, but there is still in my mind a slight uncertainty over the words "or similar factors" in the amendment.
We are told in schedule 8(2) that the board must be satisfied that at any time every person who fulfils certain defined conditions will then be eligible to participate in the scheme "on similar terms". Those similar terms are qualified by this amendment to allow a variable

for employees depending on their length of service, level of remuneration "or similar factors". It seems that if the Government are anxious to define the position, so that companies know exactly what their rights and liabilities are in terms of getting authorisation for an employees' scheme, the "similar factors" should be spelt out a little more clearly by the Financial Secretary.
My hon. Friend the Member for Norfolk, South has raised the question of the extent to which such schemes will be included within the negotiated packages within or without the Government's pay policy for the next year. This is an important matter. My inclination would be to support my hon. Friend's approach —namely, that it would certainly be prejudicial to the chances of any of these schemes getting off the ground if they were to be included within the packages.
7.0 p.m.
It seems to me that logically they should not be included, because one is concerned with the incomes policy and with the extent to which income during the year will influence the level of inflation and the Government's economic policy generally. As this is not taxed income, as it cannot be disposed of and as an employee who enters into a scheme has no option for the first five years even to have the benefit of the taxed money which has gone into the trust, it seems to me that this has no bearing whatsoever on the gross or net remuneration of the employee during that year, or even during the first five-year period, and that, therefore, it certainly should be outside the terms of any pay or productivity deal which might be affected by the Government's pay policy.
Clearly, such schemes might be of direct relevance to the level of productivity. Indeed, I think that hon. Members on each side will hope that the schemes will have exactly that sort of effect. But the fact that such schemes must apply on similar terms to all employees clearly to some extent does not make them a productivity deal. A productivity deal is more likely to link the efforts of the individual or of certain individuals within a company to particular financial aspirations or forecasts. The fact that all employees must receive the benefit of such schemes on similar terms means once more, in my view, that it should not be


regarded as part of a remuneration package which should he included for the, purposes of considering whether a company does or does not comply with the Government's economic policy.
I hope that the Financial Secretary will be able to clarify the definition of "all similar factors" and that he will underline our understanding that these will not be included in remuneration packages for the purposes of the Government's incomes policy.

Mr. Robert Sheldon: On the matter of incomes policy, the hon. Member for Chichester (Mr. Nelson) has already replied to his hon. Friend the Member for Norfolk, South (Mr. MacGregor), and I agree with what he said.
Profit sharing is a means of investment by employees in their own companies. It increases employees' capital, and it is certainly not income. We do not consider it as such. In fact, as we know, the whole purpose of these profit-sharing schemes is to give employees an interest in the long-term future of their companies. That is what it is all about. Clearly, share capital is not the same as the pay on which employees live, and the five-year locking-in period is obviously an essential part of this distinction. I see no problems there.
With regard to the definition of "similar factors", I think that it is right to have legislation in these matters not too precisely defined. Of course, we can all look at our own industrial experience and consider similar factors such as length of service and remuneration, depending on the industry concerned. But I would wish to see as large an amount of flexibility at the introduction of this new scheme as we can reasonably accept and defend. It is open to us to keep a watch on the way in which the schemes develop. The difficult aspect of the introduction of these new schemes and the legislation which allows them to be born is guessing at the way in which they may develop. For that reason, I think that we need to leave them as free as we possibly can.
That is why we have found ourselves able to accept some of the valuable suggestions which have been put forward by the hon. Member for Norfolk, South in these matters. His ideas were directed in the main to increasing flexibility, which

we accepted, and because we accepted that flexibility originally we were also pleased to accept his further suggestions on the same basic point.

Mr. Lawson: As the Financial Secretary intimated, my hon. Friend the Member for Norfolk, South (Mr. MacGregor) is to be congratulated on the immense amount of work he has done on improving the Government's scheme. The Government also deserve the congratulations of the House on having accepted and incorporated a number of the improvements that my hon. Friend has proposed.
Amendment no. 66 is an important one. It leaves the situation imprecise, as the Financial Secretary conceded, and I envisage that there may be certain problems. Companies will not know whether their schemes will get Inland Revenue clearance. But I agree with the right hon. Gentleman that in an experimental scheme of this kind—this is new ground of a sort—it is perhaps sensible to leave it imprecise for the time being, despite these difficulties.
Many fears were expressed to me, and the important thing is that the amendment makes it absolutely clear that it is not the case that every employee has to have the same amount or else the scheme is invalid. It is very important to make that clear and to show that there can be all manner of variations which would be acceptable. Bearing in mind the last amendment, one of the variations might be, for example, that the part-timer working five hours a week might get only one-eighth of the allocation of the man working 40 hours a week. But that amendment was defeated, and we welcome this one.
We heard something very important a few moments ago, and it is much more important than the amendment itself. The Financial Secretary has given the House an assurance that any shares handed out to an employee in a profit-sharing scheme will not be taken into account for the purposes of phase 4 of the pay policy, the White Paper for which is awaited. That is a very important assurance indeed, because the schemes which are perhaps closest to these profit-sharing schemes are pension arrangements. There, too, there is no immediate income in the hands of the employee. But it was specifically stated in the last


pay policy White Paper—and, indeed, in the White Paper of the right hon. Gentleman's predecessor—that an improvement in a pension scheme very much counted as an increase in remuneration for the purposes of pay policy. Indeed, we recall that the Government very nearly took the Sun Alliance Assurance Company to court on this specific point. The Government backed down because they decided that they would lose.
There is, therefore, a great change, which we welcome, towards greater flexibility, and it will help in the introduction of these schemes. The more flexibility we can have in pay, the better. We know that the Government said that their last pay policy would be flexible and that the 10 per cent. would be an average, but the 10 per cent. has become a rigid norm.
The Financial Secretary has given the House a very important assurance. It is one that we shall certainly remember when we come to debate the White Paper.

Amendment agreed to,

Mr. Robert Sheldon: I beg to move amendment no. 93, in page 75, line 3, leave out 'section 43(1)' and insert
paragraphs (a), (c) and (d) of subsection (1) of section 43'.

Mr. Deputy Speaker: With this we may take Government amendments nos. 90 to 92 inclusive.

Mr. Sheldon: Amendment no. 93 and the other three amendments which are being taken with it form part of a series of changes in this part of the Bill. These amendments remove the power of the Board of Inland Revenue to withdraw approval of a profit-sharing scheme if one of the participants in the scheme disposes of his shares during the five-year period, that is to say, the period in which he has to have these shares retained with the trustees.
The second aspect of the amendments is that they make sure that if a participant sells his shares during the five-year period—or his interest in the shares, because the shares are held by the trustees—he will have to pay tax on the full market value at the date of disposal of the shares.
The first part of the amendments meets the point which the hon. Member for Norfolk, South (Mr. MacGregor) made

in Committee. He suggested that it was unfair to give the Inland Revenue power to withdraw approval of the entire scheme if just one of the participants disposed of his interest in his shares. In the ordinary case, neither the company nor the trustees would know that the disposal had taken place. This would clearly be unfair.
The second part is to make sure that there will still be a disincentive to disposals of share interests during the retention period. Obviously, the two must go together—the eligibility of the schemes to continue despite individual withdrawals and the disincentive to make transfers of beneficial interest.

Mr. MacGregor: I welcome this group of amendments. I echo the words of my hon. Friend the Member for Blaby (Mr. Lawson) in thanking the Financial Secretary for the constructive way in which he has responded to many of the points that were made in Committee. He is quite right to draw attention to the fact, as I did in Committee, that, as the Bill originally stood, companies might be placed in the impossible position of finding their schemes made invalid if one employee did something of which they had no knowledge. This group of amendments, so far as I understand them, puts this situation right.
It is a pity that this possibility was there in the first place. I hope that it was a drafting mistake rather than an intention to tie up the schemes in so much red tape that they would never get off the ground. As a result of our debates in Committee we have managed to remove many restrictions of this type. We have removed many of the fears, and made it much more possible that the schemes will be a practical possibility for companies.

Amendment agreed to.

Mr. Robert Sheldon: I beg to move amendment no. 160, in page 75, line 31, at beginning insert 'date on which the'.

Mr. Deputy Speaker: With this we may take Government amendment no. 161.

Mr. Sheldon: These are drafting amendments which make sure that the Board of Inland Revenue will not have the power to take away approval of a profit-sharing scheme on the basis that newly issued shares do not rank for the


next dividend on the same basis as shares of the same class already in issue.

Amendment agreed to.

Amendment made: No. 161, in page 75, line 32, leave out 'period began' and insert 'date'.—[Mr. Robert Sheldon.]

Mr. Robert Sheldon: I beg to move amendment no. 192, in page 76, line 1, leave out from "which" to first "a" in line 2 and insert
either is or has control of a company which—(i) is".
This amendment removes a restriction on the type of shares used for profit-sharing schemes which can be utilised by companies which are owned by a consortium. Perhaps I can explain. If there were a number of companies, all members of a consortium, some of which were quoted and some of which were not, the shares of the quoted companies could be used in a profit-sharing scheme for the consortium. But shares in the ones which were not quoted could not be used in the scheme for the consortium. However, if an unquoted consortium member company was held by a holding company, which itself was a quoted company, the shares of that quoted company could be used in the schemes of the consortium. The position is that under the Bill as drafted the shares of the quoted company holding an unquoted company which forms part of a consortium can be used in a scheme, provided that that quoted company has three-twentieths of the shares in the consortium. What we have done here is to remove the three-twentieths qualification entirely. I think that that will commend itself to the House.

Amendment agreed to.

Amendment made: no. 89, in page 76, line 34, at end insert
or, if the scheme is a group scheme, a participating company".—[Mr. Robert Sheldon.]

7.15 p.m.

Mr. Robert Sheldon: I beg to move amendment no. 82, in page 77, line 16, leave out from beginning to "subsection" in line 18.

Mr. Deputy Speaker: With this we may take Government amendment no. 83.

Mr. Sheldon: Paragraph 11 of this schedule provides:

An individual shall not be liable to have shares
under a profit-sharing scheme if in the preceding 12 months he has had:
a material interest in a close company which is—

(a) the company whose shares are to be appropriated; or
(b) a company which has control of that company or is a member of a consortium which owns that company."

In the Bill as originally published, a material interest was defined as broadly a 5 per cent. interest in the company held by the individual and his relatives. We debated this in Committee, and a commitment was given to increase the 5 per cent figure for profit-sharing purposes. This has now been increased to 25 per cent.

Mr. MacGregor: The Financial Secretary has explained in factual terms what the amendment does. It would be right to underline that this is a very important amendment, admittedly for a comparatively small group of companies. However, it is very important for them. I again welcome the fact that the Financial Secretary has responded to the points made in Committee.
It is worth putting on record that the two types of people who will particularly be helped by this change in the definition of "material interest" are, first, family companies, where it was unfair that those who had just over 5 per cent. of the shares in that family company would be excluded from the profit-sharing schemes from now on. The second group, again in close companies, relates to situations where families may wish to bring in young key executives to play a leading part in the company, and in order to give them an incentive seek to reward them with more than 5 per cent. of the equity. In that case, they too would have been prevented from benefiting from the profit-sharing schemes.
The point is that because of the actions which this Government took in their 1974 Finance Act, any other form of share incentive scheme was also hit, so that this very important group of people would find that they were actually disadvantaged and prevented from getting any benefit out of the tax reliefs in the profit-sharing scheme. I therefore believe that this is a significant amendment, and


I am grateful to the Government for tabling it.

Amendment agreed to.

Amendment made: No. 83, in page 77, line 19 at end insert
'shall have effect, with the substitution of a reference to 25 per cent. for any reference therein to 5 per cent., for the purpose of determining whether a person has or had a material interest in a company'.—[Mr. Robert Sheldon.]

Clause 43

THE PERIOD OF RETENTION, THE RELEASE DATE AND THE APPROPRIATE PERCENTAGE

Mr. Robert Sheldon: I beg to move amendment no. 126, in page 36, line 43, leave out from 'offer' to second 'any' in line 44 and insert 'for'.

Mr. Deputy Speaker: With this we may take Government amendment no. 127.

Mr. Sheldon: Under the Bill as drafted, shares could not be disposed of in the five-year retention period except in cases of a company reconstruction or amalgamation, when the shares were to be replaced by shares in another company. In other words, under the legislation as it stood before the debates in Committee, if another company wished to make a cash offer for the shares of a company which was running a profit-sharing scheme, the trustees who held that scheme's shares would have been unable to accept the offer. The hon. Member for Cornwall, North (Mr. Pardoe) tabled an amendment which made it possible for trustees to accept cash offers for their shares during the five-year period of retention, thus making sure that perfectly reasonable takeovers may take place.
When accepting that amendment, the Minister of State, who dealt with this matter in Committee, made it clear that he was able to go further, because as a matter of drafting the amendment did not cover the cases of takeover for cash resulting in arrangements under section 206 of the Companies Act. He made a commitment to bring forward a further amendment to complement the amendment of the hon. Member for Cornwall, North in order to cover this point. These amendments meet that commitment.

Amendment agreed to.

Amendment made: No. 127, in page 37, line 7, at end insert—
(ab) directing the trustees to agree to a transaction would be entered into pursuant to them as are of a particular class, if the transaction affecting his shares or such of a compromise, arrangement or scheme applicable to or affecting—

(i) all the ordinary share capital of the company in question or, as the case may be, all the shares of the class in question; or
(ii) all the shares, or shares of the class in question, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved scheme; or'. —[Mr. Robert Sheldon.]

Amendment made: No. 90, in page 37, line 20, at end insert—
'(2A) If, in breach of his obligation under paragraph (b) of subsection (1) above, a participant assigns, charges or otherwise disposes of the beneficial interest in any of his shares, then, as respects those shares, he shall be treated for the purposes of this Chapter as if, at the time they were appropriated to him, he was ineligible to participate in the scheme; and section 47 below shall apply accordingly.'.—[Mr. Robert Sheldon.]

Mr. MacGregor: I beg to move amendment no. 68, in page 37, line 24, leave out 'fifth' and insert 'third'.

Mr. Deputy Speaker (Mr. Oscar Murton): With this we are to take Government amendments nos. 37, 38 and 39 and the following amendments:
No. 157, in line 34, leave out 'fifteenth' and insert 'fifth'.
No. 70, in line 45, leave out from 'of' to end of line 11 and insert
'that date, the appropriate percentage is 40 par cent.'.

Mr. MacGregor: This group of amendments contains what is perhaps the most significant change in profit-sharing schemes as a result of our debates in Committee, and these are in the Government amendments. I have no doubt that the Financial Secretary will be explaining them, but they are fairly straightforward. They telescope the period during which employees have to hold their shares before getting the benefits of the tax reliefs. They have a quicker taper from the fifteenth to the tenth year, and employees will now have complete tax relief if they wish to sell their shares after the tenth


year instead of after the fifteenth year, as the Bill provided originally.
This is a very important change. As the Financial Secretary will recall, it mirrors almost exactly an amendment which the Opposition moved in Committee and which was not accepted on that occasion, although the Minister of State indicated that he would look at the point again.
There are two reasons why this is so important and why, therefore, the Opposition welcome it. The first is that the 15-year period was clearly too long—I know that the hon. Member for Cornwall, North (Mr. Pardoe) shared our view—if we wanted to encourage employees to take up shares. It would have greatly inhibited the introduction of schemes in many countries. The time scale was such that many people would not have seen the benefits of the schemes for a very long time.
The second reason is perhaps the one which has convinced the Government. It was on this that the Minister of State dwelt in Committee. It is that there would have been enormous administrative complications for companies in the selling of shares, in tracing employees who had left, in rights issues and so on if the tax reliefs did not operate until the end of the 15-year period. We can all envisage the number of times that there could have been transactions of one kind or another during that 15-year period, and that, too, would have been a major obstacle to companies taking up these schemes.
I hope I am right in thinking that the Government accepted our view that the incentive aspect was too long in 15 years and, therefore, that 10 years was more appropriate, and not just the point about administration.
Although the Opposition are glad to see this change, there are two points in amendments nos. 68 and 157 to which I wish to draw attention. I deal with amendment no. 68 first. It is on the same related point of tax reliefs but on a quite different aspect of it. It provides that if an employee wishes to sell his shares after three years instead of five years, he will be able to do so, although, of course, he will have to pay during that period the full whack of tax as indicated in the

Bill. He will not be able to sell the shares tax-free. From the third to the seventh year he will have to take it at the full rate of tax, and at reduced rates of tax from then on until the tenth year, when he will get the full tax relief.
We want to change the fifth year to the third year. We believe that, if these schemes are to be made attractive to employees, it is necessary that there should be a time scale during which they cannot sell the shares other than for reasons such as death already given in the Bill. At the same time, it is necessary for them to see some point not too far ahead when they will be able to get the benefits of the shares even with the tax attached to them. With the introduction of a new scheme where we want to make the terms so exciting and generous that people will want to take advantage of it, five years is too long. In Committee we thought that two years was more appropriate, but now we put forward three years.
This is also important because earlier, when we had that very important statement from the Financial Secretary on the implications for pay policy of profit-sharing schemes and the fact that they would be excluded, I referred to the fact that many employees would see these schemes as part of their overall remuneration package. If they feel that they have to wait as long as five years before they get the ownership of the shares, I do not believe that they will see the advantages. We think that three years is a reasonable compromise.
The hon. Member for Cornwall, North opposed the argument which we advanced in Committee for two years rather than five. By extending the period slightly, we are enticing him to come a little our way, hoping that he will now agree that three years is a reasonable period in order to get these schemes off the ground in a massive way.
Amendment no. 157 is on the same point as the Government's amendments except that in amendment no. 157 we wish to reduce the period after which the shares can be sold free of all tax from 10 years to five, with no tapering. I take the point that there must be a period during which the full tax applies. I am very much in favour of that delay before the tax reliefs come into play, because I see one of the advantages of these schemes


as being that more and more employees gradually will see the benefits of equity holdings, even if they are in their own companies. Therefore, they need to be locked in for a certain time without tax reliefs.
However, I am a little concerned again that 10 years is too long. For many younger employees, 10 years is a very long time. It may mean that they do not see this as an attractive package. There is also the point that, although there is an immense advantage in moving down from 25 years to 10, there will still be administrative problems for companies in tracing employees if they have to keep their records for 10 years.
One of the criticisms of these schemes always has been that employees have too many of their eggs in the one basket—namely not only do they get their remuneration but they get shares from the same company. I am very anxious to encourage many more of our fellow citizens to acquire savings of their own, especially in equities, because there are so many tax disadvantages in that direction at present. Therefore, I can see advantages in these schemes in enabling employees after a certain period—five years may be too generous and seven years may be more reasonable—to sell the shares in their companies and, having acquired a certain appetite for equities, to spread the load by buying unit trusts or shares in other companies as well. Therefore, again I feel that one of the advantages of bringing the period down to 10 years is that it deals with the eggs-in-the-one-basket argument.
Unless the Financial Secretary is prepared to accept amendment no. 68, we shall wish to press it for the reasons that I have given. It may be that we shall not wish to press amendment no. 157, because the Government have at least met us half-way in making the change from 15 years to 10 years. But I believe that the position has to be watched very carefully as these schemes develop. If it seems that the 10-year period is too big an obstacle for many companies, we should reserve the right to come back to a change along the lines of amendment no. 157, if necessary. However, on this occasion it is amendment no. 68 which I wish to press.

Mr. Robert Sheldon: Perhaps I might first comment on the Government's

amendments and then deal with the arguments advanced by the hon. Member for Norfolk, South (Mr. MacGregor).
Government amendments nos. 37, 38 and 39 have two objectives. The first is to bring forward the release date so that it is set at 10 years after the date on which the shares are appropriated rather than the 15 years originally in the Bill. Secondly, they make an associated reduction in the percentage taper referring to disposals of shares before the release date. If the disposal date is between seven and 10 years of the date of appropriation, the percentage of the sale that is charged to tax will be 25 per cent. and not 40 per cent. I note the welcome that this has had from the hon. Member.
The hon. Member for Norfolk, South wants to go further in all these aspects. In amendment no. 68, he wants to reduce the period of retention during which a participant in a profit-sharing scheme is not able to realise his shares from five years to three years. Amendment no. 157 brings forward the release date to five years after the date on which the shares were appropriated rather than the 10 years which the Government proposed. He has another amendment which also deals with the taper. The hon. Member dealt with two aspects. It is common ground between the Government and the Opposition that 15 years is too long, and there is the obstacle of looking too far ahead and blunting the incentive.
7.30 p.m.
We are concerned with the need to identify the employee with the long-term future of the company if these schemes are to succeed. It is not for the Government to decide the level of the incentive. We are simply concerned with laying the framework so that the companies can organise the incentives that most meet their particular demands. The long-term future of the company and the identification of the employee with its position needs to be seen in contrast to the point put by the hon. Member for Norfolk, South, who said that he was a little concerned about the excess of savings of the individual in the company.
There is a balance to he struck here. I believe that a period of 10 years is right for complete tax exemption. I also believe that there should be a period of


five years after which an employee can make use of the funds, although he is liable to tax on them. If we accepted a three-year period, the identification with the long-term future of the company would be that much less. After the debates in Committee upstairs and the changes that we made consequent upon them, we feel that we have found a reasonable way of looking at these things in the initial period. It will be open to us to see the various ways in which these means are open to companies to employ in setting up the various schemes. We can return to these matters year after year and make sure that the provisions we have set out meet the requirements both of the companies and of the employees in the light of the different schemes as they are established.

Mr. Lawson: I share your anxiety to make progress, Mr. Deputy Speaker. Therefore, I shall confine my remarks to amendment no. 68.
The Financial Secretary said that he was concerned to encourage identification between the worker and the company. That is why he wants a longer period of retention. I accept that identification between the worker and the company is desirable. That is why we welcome this section of the Bill. But there will be identification only if the schemes get off the ground in the first place.
With a period of retention as long as five years there will be few schemes of this kind, because they simply will not be attractive enough to the workers concerned. Since the debate in the Committee upstairs I have had a submission from British Caledonian Airways. One point that it made was this that
The maximum period that the trustee should hold the shares on behalf of an individual should be three years. Any significant time over that will detract from the value of the scheme.
That is true. If workers are told that if they sign up in a scheme, they must hold the shares for rive years and cannot in any circumstances, save a few limited ones set out in the Bill, dispose of them, it will be a disincentive. The shares are locked in. This will not be an attractive deal and there will not be any schemes.

Therefore, the Government's purpose will not be achieved.
The hon. Member for Cornwall, North (Mr. Pardoe) did not fully understand this when we debated this matter upstairs. He thought that someone could sell his shares during the retention period, but if he did so he would not get the tax benefit. That is not the case. The shares must be held for 10 years before the individual can get the tax benefit, and I agree that there should be encouragement to hold on to the shares. But the retention period of five years is too long. During that time shares are held by trustees on behalf of the workers who are thus locked in for a five-year period that we want to reduce to three.
The employee concerned might be in the most acute financial difficulties. He might need to dispose of the shares in order to raise money. He has the shares but he cannot get rid of them; therefore they are worthless to him. That is very wrong.
The only circumstances laid down in the Bill in which an employee can get rid of his shares is if he suffers injury or disability, dismissal by redundancy, or death. The Government moved an amendment in response to our arguments in Committee and added the additional condition of reaching retirement age. However, none of these things caters for accidents or hazards in the financial sphere.
The employee, during the retention period, might not only find himself in acute financial difficulties and unable to pay his mortagee, for example; he might also find that the shares are going down in value. They might be depreciating all the time, yet he might be unable to get rid of them. This will not give him a very happy feeling about investment in equities.
The Financial Secretary may laugh, but it is not really very funny. I thought that the whole purpose of this part of the Bill was to encourage people to invest. For that reason and the other reasons that I have stated, I feel that a three-year retention period would be more appropriate, and I am delighted that my hon. Friend intends to press the matter to a Division.

Question put, That the amendment be made:—

Division No. 268]
AYES
[7.38 p.m.


Aitken, Jonathan
Hamilton, Michael (Salisbury)
Neubert, Michael


Alison, Michael
Hampson, Dr Keith
Newton, Tony


Amery. Rt Hon Julian
Hannam, John
Normanton, Tom


Atkins, Rt Hon H. (Spelthorne)
Harrison, Col Sir Harwood (Eye)
Nott, John


Atkinson, David (B'mouth, East)
Harvie Anderson, Rt Hon Miss
Onslow, Cranley


Baker, Kenneth
Haselhurst, Alan
Osborn, John


Banks, Robert
Hastings, Stephen
Page, John (Harrow West)


Bell, Ronald
Havers, Rt Hon Sir Michael
Page, Rt Hon R. Graham (Crosby)


Bendall, Vivian
Hawkins, Paul
Page, Richard (Workington)


Bennett, Sir Frederic (Torbay)
Hayhoe, Barney
Parkinson, Cecil


Bennett, Dr Reginald (Fareham)
Higgins, Terence L.
Pattie, Geoffrey


Benyon, W.
Hodgson, Robin
Percival, Ian


Biffen, John
Holland, Philip
Peyton, Rt Hon John


Biggs-Davison, John
Hordern, Peter
Pink, R. Bonner


Body, Richard
Howe, Rt Hon Sir Geoffrey
Prentice, Rt Hon Reg


Boscawen, Hon Robert
Howell, David (Guildford)
Price, David (Eastleigh)


Bottomley, Peter
Howell, Ralph (North Norfolk)
Prior, Rt Hon James


Bowden, A. (Brighton, Kemptown)
Hunt, David (Wirral)
Raison, Timothy


Boyson, Dr Rhodes (Brent)
Hunt, John (Ravensbourne)
Rathbone, Tim


Braine, Sir Bernard
Hurd, Douglas
Rees, Peter (Dover &amp; Deal)


Brittan, Leon
Hutchison, Michael Clark
Rees-Davies, W. R.


Brocklebank-Fowler, C.
Irving, Charles (Cheltenham)
Renton, Rt Hon Sir D. (Hunts)


Brooke, Hon Peter
James, David
Renton, Tim (Mid-Sussex)


Brotherton, Michael
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Rhodes James, R.


Brown, Sir Edward (Bath)
Jessel, Toby
Ridsdale, Julian


Bryan, Sir Paul
Johnson Smith, G. (E. Grinstead)
Rifkind, Malcolm


Buchanan-Smith, Alick
Jones, Arthur (Daventry)
Roberts, Wyn (Conway)


Buck, Antony
Jopling, Michael
Rost, Peter (SE Derbyshire)


Budgen, Nick
Joseph, Rt Hon Sir Keith
Sainsbury, Tim


Bulmer, Esmond
Kaberry, Sir Donald
Scott, Nicholas


Burden, F. A.
Kellett-Bowman, Mrs Elaine
Scott-Hopkins, James


Butler, Adam (Bosworth)
Kilfedder, James
Shaw, Giles (Pudsey)


Chalker, Mrs Lynda
Kimball, Marcus
Shaw, Michael (Scarborough)


Channon, Paul
King, Evelyn (South Dorset)
Shelton, William (Streatham)


Churchill, W. S.
King, Tom (Bridgwater)
Shepherd, Colin


Clark, Alan (Plymouth, Sutton)
Kitson, Sir Timothy
Shersby, Michael


Clarke, Kenneth (Rushclifle)
Knight, Mrs Jill
Sims, Roger


Cooke, Robert (Bristol W)
Knox, David
Sinclair, Sir George


Cope, John
Lamont, Norman
Skeet, T. H. H.


Cormack, Patrick
Langtord-Holt, Sir John
Smith, Dudley (Warwick)


Costain, A. P.
Latham, Michael (Melton)
Smith, Timothy John (Ashfield)


Craig, Rt Hon W. (Belfast E)
Lawrence, Ivan
Speed, Keith


Dean, Paul (N Somerset)
Lawson, Nigel
Spence, John


Dodsworth, Geoffrey
Le Marchant, Spencer
Spicer, Jim (W Dorset)


Douglas-Hamilton, Lord James
Lester, Jim (Beeston)
Spicer, Michael (S Worcester)


Drayson, Burnaby
Lloyd, Ian
Sproat, Iain


Durant, Tony
Loveridge, John
Stainton, Keith


Dykes, Hugh
Luce, Richard
Stanley, John


Eden, Rt Hon Sir John
McCrindle, Robert
Steen, Anthony (Wavertree)


Edwards, Nicholas (Pembroke)
Macfarlane, Neil
Stewart, Ian (Hitchin)


Elliott, Sir William
MacGregor, John
Stokes, John


Emery, Peter
MacKay, Andrew (Stechford)
Stradling Thomas, J.


Eyre, Reginald
Macmillan, Rt Hon M. (Farnham)
Tapsell, Peter


Fairbairn, Nicholas
McNair-Wilson, M. (Newbury)
Taylor, Teddy (Cathcart)


Farr, John
McNair-Wilson, P. (New Forest)
Tebbit, Norman


Fell, Anthony
Madel, David
Thatcher, Rt Hon Margaret


Finsberg, Geoffrey
Marshall, Michael (Arundel)
Thomas, Rt Hon P. (Hendon S)


Fisher, Sir Nigel
Marten, Neil
Townsend, Cyril D.


Fletcher-Cooke, Charles
Mates, Michael
Trotter, Neville


Fookes, Miss Janet
Mather, Carol
van Straubenzee, W. R.


Forman, Nigel
Maude, Angus
Vaughan, Dr Gerard


Fox, Marcus
Maudling, Rt Hon Reginald
Viggers, Peter


Galbraith Hon T. G. D.
Maxwell-Hyslop, Robin
Wakeham, John


Gardiner, George (Reigate)
Mayhew, Patrick
Walder, David (Clitheroe)


Gardner, Edward (S Fylde)
Meyer, Sir Anthony
Walker, Rt Hon P. (Worcester)


Glyn, Dr Alan
Miller, Hal (Bromsgrove)
Walker-Smith, Rt Hon Sir Derek


Godber, Rt Hon Joseph
Mills, Peter
Warren, Kenneth


Goodhart, Philip
Miscampbell, Norman
Weatherill. Bernard


Goodlad, Alastair
Mitchell, David (Basingstoke)
Wells, John


Gorst, John
Moate, Roger
Whitney, Raymond


Gow, Ian (Eastbourne)
Moore, John (Croydon C)
Wiggin, Jerry


Gower, Sir Raymond (Barry)
More, Jasper (Ludlow)
Winterton, Nicholas


Grant, Anthony (Harrow C)
Morgan, Geraint
Wood, Rt Hon Richard


Grieve, Percy
Morgan-Giles, Rear-Admiral
Young, Sir G. (Ealing, Acton)


Griffiths, Eldon
Morris, Michael (Northampton S)



Grylls, Michael
Morrison, Charles (Devizes)
TELLERS FOR THE AYES:


Hall-Davis, A. G. F
Neave, Airey
Mr. Anthony Berry and


Hamilton, Archibald (Epsom &amp; Ewell)
Nelson, Anthony
Mr. Peter Morrison.

The House divided: Ayes 230, Noes

NOES


Abse, Leo
Freeson, Rt Hon Reginald
Oakes, Gordon


Allaun, Frank
Garrett, John (Norwich S)
O'Halloran, Michael


Anderson, Donald
Garrett, W. E. (Wallsend)
Orme, Rt Hon Stanley


Archer, Rt Hon Peter
George, Bruce
Ovenden, John


Armstrong, Ernest
Gilbert, Rt Hon Dr John
Owen, Rt Hon Dr David


Ashley, Jack
Ginsburg, David
Padley, Walter


Atkins, Ronald (Preston N)
Golding, John
Palmer, Arthur


Atkinson, Norman (H'gey, Tott'ham)
Gould, Bryan
Pardoe, John


Bagier, Gordon A. T.
Gourlay, Harry
Park, George


Bain, Mrs Margaret
Grocott, Bruce
Parker, John


Bates, Alf
Hamilton, James (Bothwell)
Parry, Robert


Bean, R. E.
Hamilton, W. W. (Central Fife)
Pavitt, Laurie


Bldwell, Sydney
Hardy, Peter
Pendry, Tom


Bishop, Rt Hon Edward
Harrison, Rt Hon Walter
Penhaligon, David


Blenkinsop, Arthur
Hart, Rt Hon Judith
Phipps, Dr Colin


Booth, Rt Hon Albert
Hattersley, Rt Hon Roy
Prescott, John


Boothroyd, Miss Betty
Healey, Rt Hon Denis
Price, C. (Lewisham W)


Bottomley, Rt Hon Arthur
Heffer, Eric S.
Price, William (Rugby)


Boyden, James (Bish Auck)
Henderson, Douglas
Radice, Giles


Bradley, Tom
Hooley, Frank
Rees, Rt Hon Merlyn (Leeds S)


Bray, Dr Jeremy
Horam, John
Reid, George


Broughton, Sir Alfred
Howell, Rt Hon Denis (B'ham, Sn. H)
Richardson, Miss Jo


Brown, Hugh D. (Provan)
Howells, Geraint (Cardigan)
Roberts, Albert (Normanton)


Brown, Robert C. (Newcastle W)
Hoyle, Doug (Nelson)
Roberts, Gwilym (Cannock)


Brown, Ronald (Hackney S)
Huckfield, Les
Robertson, George (Hamilton)


Buchan, Norman
Hughes, Mark (Durham)
Robinson, Geoffrey


Buchanan, Richard
Hughes, Robert (Aberdeen N)
Roderick, Caerwyn


Callaghan, Rt Hon J. (Cardiff SE)
Hunter, Adam
Rodgers, George (Chorley)


Callaghan, Jim (Middleton &amp; P)
Irvine, Rt Hon Sir A. (Edge Hill)
Rodgers, Rt Hon William (Stockton)


Campbell, Ian
Irving, Rt Hon S. (Dartford)
Rooker, J. W.


Canavan, Dennis
Jackson, Miss Margaret (Lincoln)
Rose, Paul B.


Carmichael, Neil
Janner, Greville
Ross, Stephen (Isle of Wight)


Carter, Ray
Jay, Rt Hon Douglas
Ross, Rt Hon W. (Kilmarnock)


Carter-Jones, Lewis
Jeger, Mrs Lena
Rowlands, Ted


Cartwright, John
Jenkins, Hugh (Putney)
Ryman, John


Castle, Rt Hon Barbara
John Brynmor
Sandelson, Neville


Clemitson, Ivor
Johnson, James (Hull West)
Sever, John


Cocks, Rt Hon Michael (Bristol S)
Johnson, Walter (Derby S)
Shaw, Arnold (Ilford South)


Coleman, Donald
Johnston, Russell (Inverness)
Sheldon, Rt Hon Robert


Cook, Robin F. (Edin C)
Jones, Alec (Rhondda)
Shore, Rt Hon Peter


Cowans, Harry
Jones, Dan (Burnley)
Silkin, Rt Hon John (Deptford)


Cox, Thomas (Tooting)
Judd, Frank
Silkin, Rt Hon S. C. (Dulwich)


Craigen, Jim (Maryhill)
Kerr, Russell
Skinner, Dennis


Crawshaw, Richard
Kinnock, Neil
Smith, Cyril (Rochdale)


Cronin, John
Lambie, David
Smith, Rt. Hon. John (N Lanarkshire)


Crowther, Stan (Rotherham)
Lamond, James
Snape, Peter


Cryer, Bob
Latham, Arthur (Paddington)
Spearing, Nigel


Cunningham, G. (Islington S)
Leadbitter, Ted
Spriggs, Leslie


Cunningham, Dr J. (Whiteh)
Lee, John
Stallard, A. W.


Dalyell, Tam
Lever, Rt Hon Harold
Steel, Rt Hon David


Davidson, Arthur
Lewis, Ron (Carlisle)
Stewart, Rt Hon Donald


Davies, Bryan (Enfield N)
Litterick, Tom
Stewart, Rt Hon M. (Fulham)


Davies, Rt Hon Denzil
Loyden, Eddie
Stoddart, David


Davies, Ifor (Gower)
Mabon, Rt Hon Dr J. Dickson
Stott, Roger


Davis, Clinton (Hackney C)
McCartney, Hugh
Strang, Gavin


Deakins, Eric
McDonald, Dr Oonagh
Sumrrerskill, Hon Dr Shirley


Dean, Joseph (Leeds West)
McElhone, Frank
Taylor, Mrs Ann (Bolton W)


de Freitas, Rt Hon Sir Geoffrey
MacFarquhar, Roderick
Thomas, Dafydd (Merioneth)


Dell, Rt Hon Edmund
McGuire, Michael (Ince)
Thomas, Jeffrey (Abertillery)


Dempsey, James
MacKenzie, Rt Hon Gregor
Thomas, Mike (Newcastle E)


Dewar, Donald
McMillan, Tom (Glasgow C)
Thomas, Ron (Bristol NW)


Doig, Peter
McNamara, Kevin
Thompson, George


Dormand, J. D.
Madden, Max
Thorne, Stan (Preston South)


Douglas-Mann, Bruce
Magee, Bryan
Tilley, John


Dunnett, Jack
Mahon, Simon
Tomlinson, John


Dunwoody, Mrs Gwyneth
Mallalieu, J. P. W.
Torney, Tom


Eadie, Alex
Marshall, Dr Edmund (Goole)
Urwin, T. W.


Edwards, Robert (Wolv SE)
Marshall, Jim (Leicester S)
Varley, Rt Hon Eric G.


Ellis, John (Brigg &amp; Scun)
Maynard, Miss Joan
Walker, Harold (Doncaster)


Ellis, Tom (Wrexham)
Mikardo, Ian
Walker, Terry (Kingswood)


English, Michael
Millan, Rt Hon Bruce
Ward, Michael


Evans, Fred (Caerphilly)
Miller, Dr M. S. (E Kilbride)
Watkinson, John


Evans, Ioan (Aberdare)
Mitchell, Austin (Grimsby)
Weetch, Ken


Evans, John (Newton)
Mitchell, R. C. (Soton, Itchen)
Weitzman, David


Ewing, Harry (Stirling)
Molloy, William
Wellbeloved, James


Fernyhough, Rt Hon E.
Moonman, Eric
Welsh, Andrew


Fitch, Alan (Wigan)
Morris, Alfred (Wythenshawe)
White, Frank R. (Bury)


Flannery, Martin
Morris, Rt Hon J. (Aberavon)
White, James (Pollok)


Fletcher, Ted (Darlington)
Mulley, Rt Hon Frederick
Whitehead, Phillip


Ford, Ben
Murray, Rt Hon Ronald King
Whitlock, William


Fowler, Gerald (The Wrekin)
Newens, Stanley
Willey, Rt Hon Frederick


Fraser, John (Lambeth, N'w'd)
Noble, Mike
Williams. Rt Hon Alan (Swansea W)







Williams, Rt Hon Shirley (Hertford)
Woof, Robert
TELLERS FOR THE NOES:


Wilson, William (Coventry SE)
Wrigglesworth, Ian
Mr. Ted Graham and


Wise, Mrs Audrey
Young, David (Bolton E)
Mr. James Tinn.


Woodall, Alec

Question accordingly negatived.

Amendment made: No. 84, in page 37, line 26, leave out 'the company concerned' and insert 'a relevant company'.—[Mr. Robert Sheldon.]

Mr. Robert Sheldon: I beg to move amendment no. 62, in page 37, line 31, at end insert—
(a) the date on which the participant reaches pensionable age, as defined in Schedule 20 to the Social Security Act 1975; or'.
This amendment fulfils a commitment given in Standing Committee by the Minister of State so that if a participant reaches pensionable age—65 for men and 60 for women—within five years of the date on which shares were appropriated, the period in which those shares are held, the retention period will end and the participant will be able to sell those shares without waiting for the five years to pass. In other words, an employee who reaches normal retirement age will be given the same treatment as the Bill provides for those who lose their jobs on account of injury or disability or becase they are made redundant. This fully meets the commitment we gave.

Mr. Peter Rees: We are grateful to the Minister for taking heed of the point made, with his usual assiduity and eloquence by my hon. Friend the Member for Norkik, South (Mr. MacGregor). We are grateful that he has considered the point and w8 welcome this step.

Mr. Powell: I wish to draw the attention of the Financial Secretary to a little curiosity, following a brief exchange that took place yesterday.
The right hon. Gentleman has introduced into the Bill another reference to the Social Security Act 1975, which does not extend to Northern Ireland. It appears to me that an interesting consequence follows from this. In the construction of this Bill in its application to Northern Ireland, it will be necessary to resort to the Social Security Act 1975, which does not extend to Northern Ireland, to decide what provisions apply in Northern Ireland. I fully accept that the purpose is to ascertain the age of 60 for women and 65 for men and that that

could have been done by writing that provision into the amendment which we are discussing. But this illustrates the difficulty in which we get by attempting to run, or pretending to run, two concurrent statute books for the two parts of the United Kingdom.
I wish to make a practical request of the right hon. Gentleman, who kindly responded to my inquiry yesterday afternoon. I ask that a study should be made in the context of our Finance Acts of the extent to which this kind of cross-referencing between the statutes applying to Northern Ireland and those not applying to Northern Ireland is necessary. It is true that we would thereby effect only a minor tidying-up, but this would be helpful in the context of the larger debate that will fill a number of years to come as to the form in which this House is to legislate for Northern Ireland.

Mr. Robert Sheldon: I wish briefly to respond to the right hon. Gentleman, because he has made a good point. It is only right that I should give the commitment to investigate the part of this provision for which I have responsibility.

Amendment agreed to.

Amendments made: Nos. 158, in page 37, line 32, at end insert—
'(3A) In subsection (3)(a) above, "relevant company" means the company concerned or, if the scheme in question is a group scheme, the participating company; and in the application of subsection (3)(a) above to a participant in a group scheme, the participant shall not be treated as ceasing to be an employee or director of a relevant company until such time as he is no longer an employee or director of any of the particular companies.'.

No. 37, in line 34, leave out 'fifteenth' and insert 'tenth'.

No. 38, in page 38, line 2, at end insert 'and'.

No. 39, in line 5, leave out from 'is' to end of line 11 and insert '25 per cent.'.—[Mr. Robert Sheldon.]

Clause 44

DISPOSAL OF SCHEME SHARES

Amendments made: No. 91, in age 39, line 33, after 'for', insert:
'(subject to subsection (8) below)'.

No. 92, in page 40, line 6, at end add
'or
(c) a disposal of shares falling within that subsection is one which is treated as taking place by virtue of subsection (7) above and takes place within the period of retention.'.—[Mr. Robert Sheldon.]

Clause 49

INTERPRETATION AND CONSTRUCTION

Amendments made: No. 159, in Clause 49, page 45, line 27, at end insert
'"group scheme" and, in relation to such a scheme, "participating company" have the meaning assigned by paragraph 1(1A) of that Schedule'.

No. 162, in page 46, line 10, after 'shares', insert 'in relation'.—[Mr. Robert Sheldon.]

Clause 50

REDUCTION OF TAX

Mr. Graham Page: I beg to move amendment no. 168, in page 46, line 32, leave out subsections (1) and (2) and insert
'(1) The Tables set out in Schedule 9 to this Act shall, in the case of any chargeable transfer made after 26th October 1977, be substituted for the Tables in section 37(3) of the Finance Act 1975, rates of tax).'.

Mr. Deputy Speaker: With this we may also take Government amendment no. 13,

Mr. Page: This is an amendment to subsections (1) and (2) of the clause. As the Bill stands, subsection (1) substitutes certain tables in schedule 9 for the tables in the Finance Act 1975. Having made that substitution and taken that subsection by itself, those provisions in the Finance Act 1975 are, in effect, repealed. In subsection (2) the repeal applies only to chargeable transfers made after 26th October 1977. Therefore, the 1975 tables are, in effect, restored for chargeable transfers that occur before that date.
I am grateful to the Minister for writing to me on this matter and for tabling amendment no. 13 which the Government regard as solving the problem about repealing a table and then keeping it alive. However, I do not think amendment no. 13 either fits the Bill or provides an

example of elegant draftsmanship. I believe that the matter can be put far more neatly—I say this with great modesty—as I have set out in amendment no. 168. That provides that the tables set out in this Act
shall, in the case of any chargeable transfer made after 26th October 1977, be substituted for the tables
in the appropriate provisions in the 1975 Act.
That provides in one subsection clearly what is intended by the two subsections in the Bill, but does not repeal and then revive the provisions. It substitutes as from a certain date, for a certain purpose. This is a tidier way of bringing about what subsections (1) and (2) of the Bill endeavour to do.

Mr. Denzil Davies: Amendment no. 168 is in substance similar to amendment no. 13, which is.the Government amendment on the same point. There was considerable discussion in Committee on this matter. Amendment no. 13 meets the point made by the right hon. Member for Crosby (Mr. Page) in Committee. Clearly, he still prefers his own drafting to that of the parliamentary draftsman, and I do not criticise him for that.
No doubt the right hon. Gentleman will not criticise me if I prefer the parliamentary draftsman's version. There is no question of substance between us. It is a question of deciding which the neater drafting and, despite my great respect for the right hon. Gentleman, I prefer to rely on the drafting of the parliamentary draftsman and I ask the House to accept amendment no. 13 and reject amendment no. 168.

8.0 p.m.

Mr. Peter Rees: Since this is a point of technicality and some refinement, I do not propose to take much time, but I cannot forbear to observe to the Minister of State—since he so often tells us that our amendments are defective—that my right hon. Friend the Member for Crosby (Mr. Page) has proposed a more elegant and precise amendment. The Minister, out of loyalty to the parliamentary draftsman, prefers his own amendment.
I am not entirely persuaded, because if the substantial point made by my right hon. Friend in Committee is valid, the objection could still apply to the Minister's amendment. We might yet be


left in a little uncertainty about what would happen about transfers that take place before the Bill becomes law. Do the old tables or the new tables apply? Do any tables apply? We understand that the tables in section 37 of the 1975 Act are repealed by clause 50, but it is not appropriate for me to take up more of the House's time.
Although the ipse dixit of the Minister is never conclusive, perhaps we should rely on his assurance. If the courts prove him wrong, no doubt he will be happy to introduce retrospective legislation to indemnify those who have been prejudiced by his errors.

Amendment negatived.

Amendment made: No. 13, in page 46, line 35, leave out ' The new Tables apply' and insert 'Subsection (1) above applies'.

Clause 54

DEFINITION OF CONTROL OF COMPANY

Mr. Denzil Davies: I beg to move amendment no. 99, in page 49, line 27, at end insert
'but after paragraph (b) there shall be inserted "and
(c) where a company has shares or securities of any class giving powers of voting limited to either or both of the following—

(i) the question of winding up the company;
(ii) any question primarily affecting shares or securities of that class,

the reference in the preceding provisions of this sub-paragraph to all questions affecting the company as a whole shall be read as a reference to all such questions except any in relation to which those powers are capable of being exercised.".'

Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take Government amendments nos. 100, 101 and 102.

Mr. Davies: Amendments nos. 99 and 100 go together, as do amendments nos. 101 and 102. Amendment no. 99 is designed to meet a criticism levelled at the clause in Committee and to allow shares with certain limited voting rights to be ignored in deciding whether other shares give a person voting control of a company. Amendment no. 100 is a technical amendment which corrects a minor omission. Amendment no. 99 meets the

point. We discussed the matter in Committee, when the right hon. Member for Crosby (Mr. Page) and other hon. Members raised the question of the definition of voting rights. The amendment fulfils an undertaking that I gave at that time.
Amendments nos. 101 and 102 follow on from amendment no. 99 and deal with the same point in relation to transfers to employee trusts. This follows from the undertaking that is met by amendment no. 99 in relation to control. Amendments nos. 101 and 102 are designed to make a corresponding adjustment to the nature of the trustees' control of a company for the purpose of the exemption for transfers to employee trusts by individuals. Both pairs of amendments meet the same point. The second two are designed to deal with the point in relation to transfers to employee trusts.

Mr. Graham Page: I thank the Minister for dealing with the point which I raised in Committee. On this occasion I have no complaints about the drafting—though perhaps my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has some complaint about the draftsmanship. I could find none because I was so overcome with gratitude to the Minister for carrying out the assurance that he gave in Committee in dealing with the point I raised.

Mr. Peter Rees: There is not often a divergence of view between myself and my right hon. Friend the Member for Crosby (Mr. Page) and I hope that there will not be many more such occasions in future. Perhaps the divergence is not on the draftsmanship but on the substance of the amendments.
I raised this matter in Committee. I know that the Minister's heart is in the right place and I congratulate him on having taken on board, to a degree, the point I put to him, which relates not only to business assets relief but to the payment of CTT by instalments and the relief for transfers to employee trusts.
My hon. Friends and I readily conceded in Committee that the definition of control of a company, which is crucial if these various reliefs are to apply, had been a little too laxly drawn and that there were various situations—I shall not say "schemes" because that has slightly unattractive overtones, particularly after our debate last night—where relief was


conceded and where, on a fair consideration of the debates of the House, it probably should not have been conceded.
The Government, wishing to tighten the conditions that had to be satisfied, went for overkill and we pointed out that there were many situations where, in commercial truth, a person had control of a company but, by the definition adopted in clauses 54 and 55, would not be regarded as having control because he needed not only to hold more than half the ordinary shares in a company but to have powers of voting on all questions affecting the company.
The Minister of State has eliminated cases where other shareholders might have a blocking right in regard to the winding-up of a company or on questions primarily affecting shares or security of a special class. That is the primary, but not the only, point that was put to the Minister of State. For example, the holders of preference shares often have the right to vote when there is a resolution to wind up a company or when their preference dividends are in arrears. Those cases have been met by the amendments, and we are grateful for that.
However, I do not think that those who advise the Minister of State—I assume that the amendments have not sprung entirely from his own fertile mind—have thought this through with sufficient care. They will be aware that, for example, sometimes there are separate classes of shares that carry the right to appoint or remove directors. That situation would be covered by the amendments because that would be a question primarily affecting shares and securities of that class.
Equally, however, these rights are sometimes defined merely by reference to numbered shares. They are treated not as separate classes—A shares, B shares, C shares and so on—but on the basis that shares 1 to 100 have the right to appoint and remove directors and so on. That situation is not covered by the amendments, although on any fair view the existence of those rights would not prevent the holder of 51 per cent. of the ordinary shares having control of the company.
Let me give the House another example. Institutions or the Industrial and Commercial Finance Corporation take a share of a company when they inject capital

into it and they have the right to prevent alterations of the articles of association. That is quite fair and there is no hint of tax avoidance. It is done to protect their position when they invest in a company that is in a slightly precarious situation Those circumstances would not be covered by the amendments.
I shall not ask my right hon. and hon. Friends—it might be a slightly idle exercise to do so at this moment, and the right hon. Gentleman might be slightly pressed to muster support in his defence—to vote against the amendment. The group of amendments goes some way to meet the points which we raised in Standing Committee and which the right hon. Gentleman, with his usual open mind, has recognised to have validity.
We shall support the amendment, but, in view of the two examples that I have given him, we ask that the right hon. Gentleman—I have no doubt that those who advise him, if they were to ask around in the business community, especially the institutions and the ICFC, would be able to multiply the instances and perhaps refine them—recogniss that perhaps the amendment has not gone all the way to meet the substantial arguments that we advanced.
Should the right hon. Gentleman be commending another Finance Bill to the House in the reasonably near future, we hope that he will move further amendments to meet our arguments. I am sure he will recognise that they have a certain validity.

Mr. Denzil Davies: I hope that I can give the hon. and learned Gentleman that assurance. In my next Finance Bill next year I shall ensure that the clause is amended to meet his point.

Amendment agreed to.

Amendment made: No. 100, in page 49, line 32, after '3(7)', insert or 4(b) or (bb)'.—[Mr. Denzil Davies.]

Clause 55

EMPLOYEE TRUSTS

Amendments made: No. 101, in page 50, line 1, leave out 'subsections (2) and (3) below' and insert:
'the provisions of this section'.

No. 102, in page 50, line 26, at end insert:
(3) Where the company has shares or securities of any class giving powers of voting limited to either or both of the following—

(a) the question of winding up the company;
(b) any question primarily affecting shares or securities of that class,

the reference in subsection (2)(a)(ii) above to all questions affecting the company as a whole shall be read as a reference to all such questions except any in relation to which those powers are capable of being exercised.'.—[Mr. Denzil Davies.]

Mr. Denzil Davies: I beg to move amendment no. 103, in page 51, line 23, after 'section', insert—
'and Chapter III of Part III above '.

Mr. Deputy Speaker: With this we may take Government amendments nos. 125, 104 and 105.

Mr. Davies: Amendment no. 103 is consequential on amendments nos. 125, 104 and 105, which deal with the interaction between the employee trust rules and those relating to profit-sharing schemes. Those amendments give effect to an undertaking given in Standing Committee to consider the interaction between the conditions relating to profit-sharing schemes and employee trusts. They ensure that no capital transfer tax charges will arise on distributions out of employee trusts where the distributions are appropriations of shares to persons participating in profit-sharing schemes. In addition, they amend the conditions relating to the capital transfer tax and capital gains tax exemptions for transfers by companies to employee trusts.
The hon. and learned Member for Dover and Deal (Mr. Rees) raised these matters in Standing Committee. At that time I said that we would consider the interaction. I hope that the amendments go a considerable way to allay his fears and to meet the point that he raised.

Mr. Peter Rees: It is true that the amendment attempts to meet the doubts that I raised about the capital transfer tax implications of the profit-sharing schemes that may be set up under the relieving provisions of the Bill. I am grateful to the right hon. Gentleman for having met the point. It would be a rash man who said at this stage that the amendment completely meets the point. This is an

area that bristles with technical difficulties, as the right hon. Gentleman recognised. However, the amendment is the first instalment. I have no doubt that we shall be able to draw the right hon. Gentleman's attention in the months and years to come—if he is in his present position—

Mr. Peter Morrison: He will not be.

Mr. Rees: As my hon. Friend suggests it may be that I am being unduly kind to the right hon. Gentleman. I think that I am. In any event, I am sure that there will be difficulties in respect of capital transfer tax, capital gains tax, income tax and additional rate tax when dealing with profit-sharing schemes. However, as a first instalment, as an earnest that the Administration recognises that this is a rather thorny area, the Opposition welcome this group of amendments.

Amendment agreed to.

Schedule 10

EMPLOYEE TRUSTS

Amendments made: No. 125, in page 79, line 35 at end insert
'and after paragraph (b) there shall be inserted the words"but, if the trusts are those of a profit sharing scheme approved under the Finance Act 1978, paragraph (b) of this subparagraph does not preclude the application of sub-paragraph (3)(c) above in relation to any appropriation of shares in pursuance of the scheme.".'

No. 104, in page 80, line 17 at end insert
'and at the end there shall be inserted the words "or, if the trusts are those of a profit sharing scheme approved under the Finance Act 1978, of any power to appropriate shares in pursuance of the scheme.".'

No. 105, in page 80, line 31 at end insert
'and at the end there shall be inserted the words "or, if the trusts are those of a profit sharing scheme approved under the Finance Act 1978, of any power to appropriate shares in pursuance of the scheme.".'—[Mr. Denzil Davies.]

Clause 59

PROTECTIVE TRUSTS

8.15 p.m.

Mr. Denzil Davies: I beg to move amendment no. 131, in page 55, line 30 leave out '6(2) or'.
This is a minor amendment, consequential on an amendment that was accepted in Standing Committee and moved by the Opposition. That amendment confined the operation of the clause to cases where the forfeiture occurs after 11th April 1978. The clause is concerned with forfeiture, and I accepted an amendment in Standing Committee that confined the operation of the clause to cases of forfeiture that occurred after 11th April 1978. There can, therefore, be no possibility of a charge arising on Budget day 1978 under paragraph 6(2) of schedule 5 to the Finance Act 1975. The relevant words in the clause are now unnecessary and can be deleted. The amendment is consequential on accepting the amendment moved by the Opposition in Committee.

Mr. Peter Rees: I rise to express gratitude to the Minister of State. I had a small hand in Standing Committee in moving the amendments to which amendment no. 131 is consequential.
I should be grateful to be told why it is that because the Minister accepted the amendment in Committee it is unlikely, or, as he said, impossible, that a charge could be raised under paragraph 6(2) of schedule 5. It would be of assistance to the House and to those outside who follow our debates to know why it is that no charge could now arise. Obviously the right hon. Gentleman would not wish to narrow any relief granted for those who might benefit under a protected trust.

Mr. Denzil Davies: I shall try to deal with the hon. and learned Gentleman's question. As he knows, it is a technical subject. In its original form, the clause applied where forfeiture occurred before Budget day 1978 as well as after that date. The switch to interest in possession status would have provoked an unwanted charge under paragraph 6(2) of schedule 5 of the Finance Act 1975. The clause therefore contained a provision to negate that charge.
The safeguard is no longer necessary, because in Standing Committee I accepted an Opposition amendment, no. 678, which confined the operation of the clause to cases where forfeiture occurs after 11th April 1978. Where a forfeiture has already occurred on or before that date the trust will continue to be governed by the old rules, which treated these matters

as a discretionary trust. There will be no switch from discretionary trust to interest in possession status on 11th April 1978 as a result of the clause
There is now no possibility of the clause provoking a charge under paragraph 6(2) of schedule 5 of the Finance Act 1975 on Budget day. Therefore, the reference to paragraph 6(2) in the last three lines of the clause is redundant and is deleted by the amendment.
I hope that that satisfies the hon. and learned Gentleman and his advisers.

Amendment agreed to.

Clause 60

GOVERNMENT SECURITIES IN FOREIGN OWNERSHIP

Mr. Denzil Davies: I beg to move amendment no. 130, in page 56, line 5,
'and the new sub-paragraph (2A) set out above applies where the disposition mentioned in that sub-paragraph is on or after that date.'
The new sub-paragraph (2A) introduced by clause 60(1) ensures that the rules that govern availability of relief for Government securities held by discretionary trusts cannot be avoided by an appointment or advancement on new discretionary trusts. As it stands, the subparagraph operates where the advancement or appointment or new trusts took place on or after 27th March 1974. The amendment restricts the operation of the subparagraph so that it applies only when the appointment or advancement takes place on or after 20th April 1978.
I think that this amendment meets criticisms made in Committee by the hon. and learned Member for Dover and Deal (Mr. Rees) and others regarding the date of the operation of this part of the clause.

Mr. Peter Rees: Again, I rise to thank the Minister of State for having met the point put to him by myself and others of my right hon. and hon. Friends in Committee on the slightly retroactive effect of the clause. We were a little disturbed that those whose protected life interest trusts had been determined before the enactment of the Bill—in fact, before the Bill was introduced—might have had their status and the capital transfer tax consequences altered as a result of the Bill.
The Minister, in his usual frank and open way, has listened to the arguments and been convinced by them. We are grateful that he has met our objections by moving amendment no. 130.

Amendment agreed to.

Clause 63

DISCLOSURES OF INFORMATION TO TAX AUTHORITIES IN OTHER MEMBER STATES

Mr. David Stoddart: I beg to move amendment no. 29, in page 5, line 27, leave out Clause 63.

Mr. Deputy Speaker: With this we may take Government amendment no. 98 and the following amendments:
No. 30, in page 56, line 33, at end insert:
'but no disclosure shall be made under this section unless the taxpayer concerned has been informed that such disclosure has been requested and has given his consent in writing to the disclosure'.
No. 8, in page 56, line 33, at end insert:
'The Commissioners of Inland Revenue or an authorised officer of those Commissioners shall not disclose information by virtue of the said Directive without requiring the competent authorities of the receiving State to afford the information the same degree of confidentiality which it enjoys in the United Kingdom.'.
No. 9, in page 56, line 33, at end insert:
'Nothing in this section shall permit the Commissioners of Inland Revenue or an authorised officer of those Commissioners to authorise the use of information disclosed by virtue of the said Directive other than for the purposes of taxation or to facilitate legal proceedings for failure to observe the tax laws of the receiving state.'.

Mr. Stoddart: Clause 63 engendered a good deal of debate in Committee upstairs, and rightly so, because it seeks not only to make available to foreign tax authorities the private affairs of United Kingdom citizens but to legislate by reference to another authority—namely, a directive of the EEC. Therefore, the clause seeks to legislate on the basis of a non-parliamentary and, indeed, non-British document. I—and, I hope, the House—will not accept with equanimity the subordinate role to which we appear to have been relegated by the introduction of the clause.
There is no doubt that the scope of EEC directive no. 77/799 is very wide. It goes beyond the double taxation agreements, since it provides for continuous collaboration between all the members of the Community and the Commission, which apparently intends to keep a kind of surveillance over the way that this mutual assistance works.
Hon. Members will have obtained a copy of the Official Journal of the European Communities which contains EEC directive 77/799. Therefore, it will not be necessary for me to quote the document at length. However, I should like to draw particular attention to one or two points which need some emphasis.
First, I direct attention to the final paragraph of the preamble. It states:
Whereas collaboration between the Member States and the Commission is necessary for the permanent study of co-operation procedures and the pooling of experience in the fields considered, and in particular in the field of artificial transfer of profits within groups of enterprises, with the aim of improving those procedures and of preparing appropriate Community rules".
It will be noted that the last words of that paragraph refer to "preparing appropriate Community rules". As so often happens in matters appertaining to the EEC, an innocuous-sounding phrase can mean a great deal. In this case it could be the start of the merging of our tax system into a Community system—all the better perhaps to facilitate economic and monetary union and the federal European State which some hon. Members apparently wish to see.
Article 3 is very short and I quote it in its entirety:
Automatic exchange of information. For categories of cases which they shall determine under the consultation procedure laid down in Article 9, the competent authorities of the Member States shall regularly exchange the information referred to in Article 1(1) without prior request.
That allows categories of cases to be extended by administrative action without further reference to the House of Commons. The House should take due note of the fact that this non-elected body, responsible to no one, can extend legislation without the House having knowledge of it. That is a serious matter. Therefore, the classes of taxpayers referred to in the preamble to the directive can be extended unbeknown to Parliament or to the people themselves.
The tax and, therefore, the personal affairs—make no mistake about that; it is not only the tax, but the personal affairs—of every individual and enterprise in the land can be made available to eight alien States. That is an unprecedented intrusion into the lives of British people by foreign Governments.
I find it quite incredible that such a prospect should be viewed by the House with apparent equanimity, especially as I am sure that, if it were proposed that the tax affairs of individuals should be made known to the Supplementary Benefits Commission, all hell would be let loose. There would be an outcry of colossal proportions. The Opposition and many of my hon. Friends, if not all of them, would be on their feet if this facility were extended to one of our own Departments of State, yet we are proposing to extend this facility and this private information about people's personal affairs to eight foreign Governments.
I should have thought that my right hon. and hon. Friends on the Front Bench, who have great concern for the rights of the individual, would be far more cautious in recommending the clause to the House. Indeed, I am sorry that they included it in the Bill.
But the Opposition also have responsibility here, because they prate loud and long about the rights and freedoms of the individual and are for ever condemning the growth of bureaucracy and its baleful encroachment on the lives of individuals. Through this clause and the directive, we see a massive extension in one fell swoop of a bureaucracy more pervasive and powerful than we have ever known in this country. We shall see how far Opposition Members care for individual freedom and the fight against bureaucracy when they vote on the clause tonight.
There are two other provisions in the directive to which I should like to draw attention. First, there is provision for officials of the tax authorities of other States to be present in this country. Presumably, the purpose is to enable them to make inquiries about our citizens. The British people will not take too kindly to being investigated by tax inspectors from foreign States, even if that is done with their own Government's consent.
The other provision which holds great danger is contained in article 4(2). This

permits member States to extend the exchange of information provided for in the article beyond that which is specified in the article. Once again, by administrative action the powers of tax officials will be extended without further reference to the House. The scope of those inquiries will be extended without our knowledge and without the House having the opportunity to have its say.
8.30 p.m.
It will be said that the public need not worry about the directive because it is intended to catch only the multinational companies and other big organisations which endeavour to defraud the tax authorities in the EEC. It will be said that the individual and the small company have nothing to fear. Such an argument might sound plausible, particularly to some of my hon. Friends who, understandably and laudably, wish to dial with large-scale tax evasion. But I do not believe that the big boys will be caught. The minnows will be caught while the sharks swim laughing all the way to the bank. I hope that my hon. Friends will keep that in mind.
There are other and better ways which have been set out by the Labour Party to deal with multinationals. My hon. Friends should reflect that compulsory planning agreements would do far more than the whole of this directive to end tax evasion. Then the job would be done without involving the freedom and privacy of so many citizens who cannot and would not embark upon tax fraud.
During the debate in Committee, worries were expressed about the privacy of information given to foreign tax authorities and the use to which that information would be put. My right hon. Friend the Financial Secretary did his best to allay those fears. Indeed, he has tabled an amendment to try to deal with them. I do not believe that his amendment is a substitute for the rejection of the clause.
The tax authorities of other countries do not necessarily take the same meticulous care as is taken by our Inland Revenue Department to ensure the complete confidentiality of information revealed by the citizen for tax purposes. My right hon. Friend should examine the procedures in some other countries. He would probably find that our Inland Revenue Department is meticulous and mindful


of the confidentiality of information that is given to it.
I return to the question of the standing of this House in relation to EEC legislation. In Standing Committee, the hon. Member for Eastbourne (Mr. Gow) asked the Financial Secretary:
Will the right hon. Gentleman explain one point which is crucial to the vote that we shall be taking shortly? In the view of the Government, what would be the consequence for the United Kingdom Government and the United Kingdom Parliament if this Committee and later, the House were to remove clause 62 from the Bill?
The clause that we are now discussing was clause 62 when we were in Committee. The Financial Secretary replied:
We should be in breach of our obligations and would be taken to the European Court in due course."—[Official Report, Standing Committee A, 21st June 1978; c. 1653.]
That was an intriguing answer. It certainly raises interesting constitutional and, perhaps, judicial questions. Let us reflect on the implications. By including the clause to implement the directive, the Government have clearly met their obligations. If the clause is rejected, the responsibility for failure to implement the directive will rest firmly on the shoulders of this House and of individual hon. Members.
In those circumstances, whom would the Commission prosecute? It could hardly be the Government, since they would have discharged their responsibility. Would it be Mr. Speaker? We do not know. Would the Speaker of this House, as in earlier times, be called upon to bear the punishment as an individual for the collective actions of Parliament? Is he to be taken to the Tower at the behest of this new absolute monarch in Europe, to be incarcerated and perhaps even fined or, even worse, beheaded, as were so many Speakers before him?
This is an interesting matter upon which we should certainly reflect. Perhaps Parliament as a body would be prosecuted, although I see some difficulty there. Perhaps it might be those individual Members of Parliament who voted against clause 63 and the edict of the EEC. Perhaps we would be surcharged as local councillors are surcharged, or perhaps we would be put in the Tower.
I do not know whether there would be a confrontation, but there could be. I

sincerely hope that later the Government will have second thoughts and withdraw the clause, or that perhaps the official Opposition will join other hon. Members in trying to knock it out.
I said earlier that the clause and the directive which it seeks to implement are only the thin end of the wedge. I have been proved right. After I tabled the amendment, my attention was drawn to a new draft directive, R1123/78, which would extend the provision of directive 77/799 to value added tax. Since many hon. Members will not have seen it, I shall read out the explanatory memorandum. It was prepared by Her Majesty's Customs and Excise and is dated 28th June 1978. It reads
Subject Matter… This proposal would amend Directive 77/799/EEC on Mutual Assistance in the field of direct taxation (on which an Explanatory Memorandum was submitted by the Board of Inland Revenue in May 1976) to provide for the competent authorities in Member States to assist each other in the correct assessment and collection of value added tax. Directive 77/799/EEC provides for:

(a) the mutual provision of information by each Member State to the others either on request or, in certain circumstances, automatically or spontaneously without prior request;
(b) inquiries to be carried out by a Member State at the request of another;
(c) the presence of another Member State's tax officials to be allowed in a Member State for the purpose of exchanging information; and
(d) continuous collaboration by Member States and the Commission so as to keep under review the assistance being provided under the Directive and to improve the machinery."

Thus, close on the heels of directive 77/799 comes another proposed directive to deal with VAT, which is bound to cause further headaches.
The small business men whom the Opposition so often befriend will feel even more harassed. The Opposition have made great political capital of late out of the harassment of small business people by Customs and Excise. If the new draft directive is passed—as it surely will be as night follows day if clause 63 remains in the Bill—I say particularly to the Opposition that they will have sold the pass for small businesses. They cannot in conscience oppose the draft directive if they support the clause.
Matters are even more serious than that. It will not be long before the EEC


will collect its own resources through VAT. Every small business man who pays VAT will be visited not only by Her Majesty's Customs and Excise but by the customs and excise officers of foreign Governments. He will feel very harassed in those circumstances.
The Tories should consider the repercussions. They will never again be able to hold up their heads and say that they are the champions of small business men if they allow that directive to follow closely on the heels of the one we are discussing.

Mr. Max Madden: My hon. Friend has been describing graphically the fate which lies in store for many sections of the community. Would he say what fate might befall tax consultants? Does he think that one of the Opposition spokesmen might have an interest in this matter?

Mr. Stoddart: I am obliged for that intervention, but I fear that under the directive the only fate which will befall tax consultants is that they will get richer because there will be more for them to do. It may therefore be welcome to tax consultants on both sides of the House. Nevertheless, let us hope that they will have the good sense to reject clause 63.
I hope that the House will realise the serious implications of the clause, not only for the taxpayer and the small business man but for the future of this House and the sovereignty of the British nation. If hon. Members understand them, they will undoubtedly reject the clause by a large majority.

8.45 p.m.

Mr. Powell: The more imaginative and historical portions of the eloquent speech of the hon. Member for Swindon (Mr. Stoddart) should not obscure the serious implications of what he said nor diminish the importance of the debate which he has initiated. Clause 63 is a clause without a predecessor, but, as the hon. Gentleman said, it is a clause which, if it stays in the Bill, is destined soon to have a successor.
The clause refers to Commissioners of Inland Revenue and their authorised officers; and the origin of the clause is a Directive of last year. The hon. Gentleman understated the instantaneity with

which the debate on the clause in Committee was followed by the arrival, hot from Brussels the following day, of the next directive, the directive making the same requirements in respect of VAT. So this is only a preliminary to the corresponding clause in next year's Finance Bill, which will make the same enactment, only in respect of the Commissioners of Customs and Excise, as this makes in respect of the Commissioners of Inland Revenue.
We—those of us who have warned of the expanding nature of the claims and encroachments of the European Community—have usually had to wait at any rate a few months for the verification of our warnings. In this case the interval was measured only in hours. The hon. Gentleman was right, at the outset of this debate, to draw attention to the next stage.
It is important that the terminology of this remarkable and unprecedented clause should be studied carefully by the House. With great respect to Treasury Ministers, I am not absolutely certain—I have studied the proceedings in Committee again carefully—whether they themselves are fully alive to the implications of the wording of the clause. It purports to say that:
No obligation as to secrecy imposed by statute or otherwise shall preclude the Commissioners of Inland Revenue…from disclosing…information required to be so disclosed by virtue of the Directive"—
the directive referred to in the clause.
In the course of the Committee proceedings the Financial Secretary was asked to quote the statute in which these obligations were to be found. He referred the inquirer to the Taxes Management Act 1970. I take it—no doubt the right hon. Gentleman will correct me if I am mistaken—that the reference was to schedule 1, which contains the forms of declaration required of those who serve in the Inland Revenue. The declaration there says:
I will not disclose any information received by me in the execution of my duties except for the purposes of my duties or for the purposes of any prosecution…or in such other cases as may be required by law.
It is upon those last words that I want to rest for a moment.
The present confidentiality requirements allow for a disclosure
as may be required by law
in cases other than the execution of the duties of tax collection or proceedings in the courts. That perhaps casts light upon the term "required", which appears in the clause. Presumably the clause is intended to create a new requirement of law: by writing the law of the Community into the law of this country, a requirement of law is created which is covered by the declaration of confidentiality binding upon all Inland Revenue personnel.
But then one realises that, if that were so, we should not require a clause in this form. We should not then require to waive the obligation imposed by statute, because the obligation imposed by statute has an exception already where there is a requirement of law. So the case is by no means so simple.
Then our eye lights upon that remarkable word "preclude". The clause does not say that the obligation as to secretary shall not apply in these cases. It does not say that the requirements of the directive shall be requirements of law for the purposes of the Taxes Management Act 1970. It simply says that the obligation shall not "preclude" the Commissioners of Inland Revenue from complying with the requirements of the directive.
We are entitled to have a careful explanation from the Government of the reason why this clause is drawn in such a curious form. I will come at once to an indication, which was given in the debate in Committee, of what lies behind it.
The Financial Secretary was invited by the hon. Member for Edinburgh, Pentlands (Mr. Rifkind)—indeed, there is an amendment on the Amendment Paper tonight by the hon. Member to this effect—to write safeguards into the Bill. The reply of the Financial Secretary was clear. He said "We have only to do what is required by the directive and we have only to do it upon the terms of the directive itself." He proceeded to draw attention to the terms of the directive upon which he relied. He said "There is no need whatever to set any of this out, no need to indicate the safeguards, because they are in the directive, and clause 63

only covers what is required by the directive."
The Financial Secretary even quoted, not merely the articles of the directive but the preamble, which, at any rate in the construction of United Kingdom statutes, is not part of the law. But the Financial Secretary regards the preamble to an EEC directive as an integral part of the directive. The right hon. Gentleman nods assent. This is one important difference that we must bear in mind when we are reading the orders of our masters that come from Brussels. It is no use skipping through the "whereases." They are just as binding, just as carefully to be interpreted, as the articles, when we come to them and supposing that we can understand them.
In particular, the right hon. Gentleman drew attention to the requirement of confidentiality:
whereas it is also necessary that the receiving States afford the information the same degree of confidentiality which it enjoyed in the State which provided it, if the later so requires.
The right hon. Gentleman said, in Committee:
Therefore the position, as I see it, is quite clearly safeguarded."—[Official Report, Standing Committee A, 21st June 1978; c. 1649.]
The position of the Financial Secretary was that we can go through every bit of the directive—not "can"; but "must", for we are duty bound as a legislature, since we are embodying this in the law of our country—from the first "whereas" to the complimentary close or whatever they have in an EEC directive and pick out what we are actually required to do, because it is only where a requirement is imposed by the directive, so the Financial Secretary says, that this clause and the waiving of confidentiality will apply. Likewise also the safeguards attached to the requirements will automatically be invoked. So, we are bound by the requirements and protected by the safeguards which are written into the document.
That was the doctrine of the Financial Secretary. Presumably it was the doctrine of the Government. But no longer, for there is an amendment being taken together with this one—no. 98, in the name of the right hon. Gentleman the Chancellor of the Exchequer—which reads:
Neither the Commissioners nor an authorised officer shall disclose any information in


pursuance of the said Directive unless satisfied that the competent authorities of the other State are bound by, or have undertaken to observe, rules of confidentiality with respect to the information which are not less strict than those applying to it in the United Kingdon.
Later on, therefore—if the clause were, by any mischance, to remain after this debate—up would pop the Financial Secretary to move into the statute a safeguard which, presumably, therefore, is not valid or existent by reason of the directive. If he says "Oh, this is only for greater assurance", can we, please, have written into the Bill all the other safeguards and all the other conditions which are in the directive? And can we please have them written in the construable language of a United Kingdom statute, instead of having to distil them as best we can from the terms of the directive?
The fact is that the Government have put their own foot through their claim that we are protected by the terminology of the directive at the same time as we are required by it to do anything. Whatever they believed three weeks ago, they no longer believe it now.
Let us see what are the requirements of the directive. Let us see what are the mandatory parts of the directive. What are the things in the terminology of clause 63 which are
required to be disclosed by virtue of the directive"?
Article 1 states that
the competent authorities of the Member States shall exchange"—
that is mandatory—
any information that may enable them to effect a correct assessment of taxes on income and on capital.
Article 3 states that
they shall regularly exchange the information…without prior request.
They "shall" do that: so that is a requirement; no request has to be made. They are to do it in "categories of cases" which are
determined under the consultation procedure
in article 9. The hon. Member for Swindon was perfectly right in saying that obligations are to be created and defined not by this instrument itself but by things done under this instrument which will in no way formally be brought to the know

ledge of this House, let alone of the taxpayers of this country and their advisers. So there is to be regular exchange, and that is mandatory, too.
Then article 4 states that
The competent authority…shall without prior request forward the information referred to in Article 1 (1)…in the following circumstances".
Those are then set out. I shall not quote them all. The first is that the competent authority
has grounds for supposing that there may be a loss of tax in the other Member State".
So, if there are "grounds for supposing", then, without prior request, it is mandatory in those circumstances for the information to be given. "We think it is quite possible that taxpayer X may be liable to more tax in France or Luxembourg than he is paying. Send his file." That is not voluntary. It is a requirement. No doubt it will apply presently to Athens, presently to Lisbon, presently to Madrid, and presently to Ankara. The files will be going further and further afield.

Mr. Ian Gow: Valetta?

Mr. Powell: Oh, dear, I did not know about that. It gets worse and worse, Mr. Deputy Speaker, but I do not want to pile on the horror. It is bad enough that our tax files should go across the Channel and that there should be a requirement for the transfretation of our income tax papers.

Mr. Hugh Dykes: There is no such word.

Mr. Powell: No such word as "transfretation"? If the hon. Member wishes to be well employed during the drier parts of my speech, he may consult the full Oxford Dictionary, where he will find "transfrctation" all right.
9.0 p.m.
But once again the warning of the hon. Member for Swindon comes in point. We may think that we know the total number of circumstances in which it will be compulsory, without request, to send the file. I use the term "send the file" as a shorthand expression for giving the information. Not at all. The "competent authorities", when they get their heads together under the consultation procedure in article 9, may extend the exchange


of information provided for to cases other than those specified therein. So there is no limit to the circumstances in which it is requisite for this information to be sent from this country to the other countries of the Community.
We are, however, provided with certain conditions in which the information may be refused.

Mr. Dykes: Does not the right hon. Gentleman agree that all that he has just described with the same language, terms and procedures, happens already under the existing procedures of double taxation relief agreements?

Mr. Powell: It does not happen, as the hon. Gentleman will discover if he reads the report of the Committee of another place and the evidence which it took on this directive. He will find there clearly set out the circumstances in which this goes beyond what is done under the double taxation agreements. By the way I should be grateful if, in his winding-up speech, the Financial Secretary could explain the way in which double taxation agreements are accommodated with the confidentiality requirements of the Taxes Management Act of 1970. It may be that there has been a provision somewhere which automatically scoops up all the double taxation Acts and removes the safeguard of the 1970 Act. That is a point which it would be helpful if the Financial Secretary mentioned.
Since the hon. Member for Harrow, East (Mr. Dykes) raised it, he may be interested to know that the spontaneous provision of information in certain cases—those are the cases to which I referred—is not provided for under the double taxation arrangements. The double taxation arrangements are narrowly concerned with the affairs of cases where relief is claimed by a taxpayer under those arrangements and where, of course, the relevant information in both countries must be made available. This is a very different matter. As the hon. Member for Swindon said, this is the beginning of a joint taxation system and administration in the EEC as between ourselves and the other countries of the Community.
There are quite a number of provisions in this directive which are permissive, which include the word "may" and not

the word "shall". I think that the Financial Secretary ought to say clearly to the House whether he regards this directive as binding only in so far as it contains the terminology "shall", and not binding in so far as it contains the terminology "may". I ask him that particularly because of that extraordinary word, "preclude", to which I drew attention at the beginning, in the terms of this clause, which states:
No obligation as to secrecy…shall preclude the Commissioners of Inland Revenue…from disclosing information".
I am inclined to construe that as meaning that the Government regard the directive as binding upon this country not only in its mandatory portions but in its permissive portions. They want to be able to act in accordance with the permissive parts of the directive as well, and they want to be able to show our masters in Brussels, for it must be remembered that this work has to be shown up. By the end of the year we must turn this in at Brussels, to prove that we have done what is required of us.
I believe the reason for that word "preclude" is so that the Government will be able to tell the Community that they will be able to fulfil not only the mandatory but the optional portions of the directive, because they have framed the clause so cunningly with the word "preclude"—perhaps someone thought that the House of Commons might not notice it. "We shall do all that is required of us by the directive", they will say, "and the Inland Revenue will not be precluded by the conditions of confidentiality from transferring the information. That is the reason why we have gone to all this trouble, instead of simply making the actual requirements part of the law, with which, automatically, it would then be proper for the Inland Revenue to comply".
Since this is an unprecedented provision, it was right that it should be examined, even on Report, textually and carefully and, indeed, that we should have a much more careful exposition of what is meant by this instrument which is now written into our own statute book. We have been used for a long time to legislation by reference, and we have complained about it for a long time. But this is legislation by reference to a non-statute, the outlandish description of


which is actually written into the clause and printed in the margin of the Bill.

Mr, Douglas Jay: May I ask the right hon. Gentleman a question at that point, because I think that he was a member of the Standing Committee and I was not? The clause provides that the Commissioners are empowered to disclose to the competent authorities of another member State any information required to be so disclosed by virtue of the directive of the Council of the European Communities dated 19th December 1977, no. 77/799. Supposing that directive were to be amended—or perhaps I should say "revised". Would the altered conditions of the directive automatically constitute an obligation under this clause, or would it be a different directive in those circumstances? I think that we should be sure about that, otherwise we are handing a complete blank cheque to the Commission to do anything that it likes.

Mr. Powell: I am sure that the Financial Secretary has taken note of that question and will answer it. But, at any rate, when we come to the next directive—the one for VAT—I have no doubt that we should, putting it in the conditional, require another clause.
I repeat, I believe that we are entitled to look at this provision with extreme care because we are creating a most important precedent. But we are also entitled to look at it at large. After all, we are legislating for the taxation of the people who sent us here. To legislate for taxation is the reason why we are sent here and why we have our other powers. So this is at the heart of our quality as Members of Parliament and as a House of Commons.
We are duty bound to ask ourselves whether we ought to enact tinder these vague and unlimited terms the disclosure to the tax authorities of other countries of information obtained under the authority of this House from persons under the jurisdiction of this House—information which we would not dream of allowing to be communicated to another branch of the Administration. If the answer is that those who sent us here do not expect it of us and were not warned that we should authorise that

disclosure of their affairs, we ought not to do it. That is a matter which is unaffected by any argument about treaties, directives, and the rest of it.
We have a plain and simple duty to those from whom we derive our powers to tax and our powers to legislate. That duty is inconsistent with allowing this clause to remain in the Bill.

Mr. J. W. Rooker: In principle, I am in favour of somethting like clause 3. However, I am glad that I have listened to the speeches of my hon. Friend the Member for Swindon (Mr. Stoddart) and the right hon. Member for Down, South (Mr. Powell). I depart from the speech of the right hon. Member for Down, South on a matter of principle. I am not in favour of the closed tax system, which mitigates against most of my constituents who are not fiddling their taxes.
I want the tax system to be far more open. I do not see why tax returns should not be made available as public documents. I know that that would upset Conservatives, and I know that the paper work would be massive, but at least it would be one way of ensuring that the system was open and people paid their proper dues. It would have a self-regulating effect on tax abuse and tax avoidance. It works quite well in other countries, so why should it not work here?
This applies equally to companies. I have not read the Committee proceedings on this matter; the House will know that I was prevented from serving on the Committee this year. If there is a means under Common Market legislation of making sure that multinational companies do not run not around the world, playing off one Government aginst another, in order to lessen their tax liabilities, and if advantage comes as a byproduct of being in the EEC, we should use it and get the full benefit from it.
I quote one example. It concerns the multinational company of Hoover Ltd. This is a very large American-controlled multinational. In its 1976 accounts there was a note in small print at the foot of page 19 which said:
Hoover Ltd's taxation liabilities for a number of years have not yet been agreed due to discussions with the Inland Revenue regarding the pricing of export sales.


It so happens that Hoover Ltd. has overseas associated companies in Belgium, France, Germany, Holland and Italy—all EEC member States. Clearly, someone in the Inland Revenue has discovered that Hoover has been fiddling transfer prices. Of course, it is able to do this as a multinational with overseas associated companies and overseas subsidiaries.
I do not know yet whether the company's discussions with the Inland Revenue were completed. My right hon. Friends on the Treasury Bench are prevented from knowing any details of particular companies' taxation affairs—which is ludicrous in the extreme—so there is no real way of finding out whether this matter has been resolved. If my right hon. Friend the Financial Secretary can convince me that clause 63 as amended would obviate the sort of delay that has taken place in the case of Hoover and that we could go in straight away without any of the barriers that are put up at present. it would convince me that my original idea was right—that I am basically in favour of clause 63.
There are other matters that need illuminating. One is the question of the parts of the United Kingdom—or I consider them so—that are not member States of the EEC. I refer, of course, to the Isle of Man and the Channel Islands. The more that clauses like clause 63 are enacted, the more it will put the onus and the pressure on the Isle of Man or Jersey and Guernsey to become real tax havens—much more so than they are at present. They will also be tax havens for other EEC States. Presumably the Germans and the Dutch who have been fiddling their taxes will not like the operation of this directive as it affects them in their own States and it will seek to bolster up the economies of these offshore islands.
My right hon. Friend and I had correspondence earlier this year about this matter, particularly in relation to the Irish banks. I do not sort out the Irish banks particularly, because there are other banks operating in this country that are controlled from outside the United Kingdom and have a branch here. It is possible for United Kingdom citizens to walk into those banks, open an account and ask for the account to be kept outside the United Kingdom, so that the interest that may accrue on those accounts is not auto

matically disclosed to the United Kingdom Inland Revenue.
Of course, if those people do not fill in their tax returns accurately, which by law they are supposed to do, there is no way of finding out how much money has accrued in interest through these various bank accounts, whether they be in other Common Market countries or in the Channel Islands. This aspect of the matter has not been adequately tackled by the clause, and I hope that my right hon. Friend will at least allude to it in winding up the debate.
9.15 p.m.
This is not an unimportant matter. The more complicated the tax law becomes and the more we are caught in the trap of having to slip Common Market directives into Finance Bills, at the fag end, usually—last year there was another example concerning membership subscriptions to trade unions and professional bodies, which caused considerable discussion in Committee, when it was slipped in by a schedule; and the right hon. Member for Down, South says that this will happen with VAT again next year—the more difficult it will be for us to represent our constituents in their individual dealings with the Inland Revenue.
I say that only because I have examples of the constituent who has a major tax problem because of a business problem. But like the constituents of many of my hon. Friends, the overwhelming majority of my constituents do not have overseas bank accounts and do not arrange their affairs so that the German, Dutch and other tax authorities might be inclined to make inquiries of our Inland Revenue. It is not such a matter.
This concerns the "sharks". My hon. Friend the Member for Swindon says that they will get off. Frankly, if they are to get off, I do not know why we are here debating the clause. Unless the Treasury Bench can convince us that the purpose of this provision is to catch the sharks, clearly it is totally unfair and it is a waste of the time of the House to be making it anyway.
But the sharks must be caught. The abuse within the tax system is something that we do not debate enough in the House. Some Opposition Members make constant imputations against the social security system, but the tax system and all


the allowances within it provide a social security system for companies which do not pay their rightful taxes, and the same applies in relation to well-heeled individuals. It is exactly the same argument.

Mr. Martin Flannery: Is the hon. Member for Aberdeen, South (Mr. Sproat), who always raises social security matters, present in the Chamber now?

Mr. Rooker: I take the point that my hon. Friend makes. The hon. Member for Aberdeen, South (Mr. Sproat) is, once again, missing during a debate on taxation, as he always is. However, anything that operates in the Common Market to catch these sharks must be good and must be welcomed. Therefore, in principle I agree with it.

Mrs. Audrey Wise: Does my hon. Friend agree, however, that the best way of dealing with multinationals is to disclose the information to the workers concerned? Would not that be far more effective, because tax authorities might well not recognise a transfer pricing arrangement if it were before their eyes, because they lack the technical knowledge to do so, whereas information disclosed to workers would surely be by far the most effective method.

Mr. Rooker: My hon. Friend is perfctly right. We should be debating and enacting the proposals in the 1974 Labour Party manifestos to deal with multinational corporations. Quite clearly, those were on the agenda. They are still on the agenda. Unfortunately and tragically, they are not in a Bill that is before the House.
But my hon. Friend is right. The workers can recognise the little tricks and fiddles that companies get up to, because the workers are dealing with the paper work and they know what is happening within their companies. This is particularly so in the organised white-collar sector in private industry. Some 10 or 15 years ago it was not well organised in terms of trade unions, but these days the trade unions, such as APEX and ASTMS in particular—which has a first-class record in these matters—are educating their members on what to look

for, so that we can spot what companies are up to.
Far be it for me to say that we can rely on the Commissioners of Inland Revenue. Every time anyone refers me to the Commissioners of Inland Revenue and says that one can trust them and rely upon them, I am reminded of the fact that Mr. John Poulson was a commissioner of the Inland Revenue. For me, that is the end of the argument. That one factor always remains uppermost in my mind. Therefore, I do not have the same confidence in that sector of the establishment as apparently other hon. Members have.
Let me deal with the point about competent authorities. I am well aware that the matter is well defined in the directive, but I do not want us to get into a position such as that enjoyed in Richard Nixon's days in the United States. We all know that anybody in that country who was suspected of being a dissident or who might cause a spot of bother was subject to investigation by the Inland Revenue services. I do not want that to happen here. I am in favour of opening up the tax system for everybody, not for the secret few who pull the levers of power and wish to put pressure on those who may be knocking the system.
I believe that there is a danger in the way this provision is worded. There is something to stop the authorities in this country examining the files of, for example, my hon. Friend the Member for Keighley (Mr. Cryer). I refer to my hon. Friend, who, as we all know, is Under-Secretary of State for Industry, because I see that he is sitting on the Government Back Benches. This argument could also apply to my hon. Friend the Member for Sowerby (Mr. Madden), who is a genuine Back Bencher. However, there is nothing to stop the authorities in this country asking competent authorities abroad to obtain details relating to somebody in this country.
There is nothing to stop MI5, MI6 or DI6—I do not know which it is, but they are the ones we are not allowed to debate or ask questions about—from asking a competent tax authority in Germany to make inquiries about somebody in this country. That can happen by using this sub-contracting clause.

Mr. Christopher Price: In a curious sense, the clause is a mirror image of the freedom of information legislation mentioned by the Prime Minister at Question Time today, which, he said, he had not the slightest intention of enacting.

Mr. Rooker: I heard my right hon. Friend the Prime Minister make that remark. When I heard that statement on the radio, I became even more convinced that Prime Minister's Question Time should not be recorded live.
My hon. Friend makes a valid point. That danger exists. Treasury Ministers do not know what the secret service gets up to. They have not been told the name of the company which has perpetrated the £200 million rip-off as a result of an artificial tax scheme. The fact that the Inland Revenue will not tell them the name of the company is an outrage.
With that example before us, they cannot convince me that they are 100 per cent. sure about what the security services get up to when using this type of provision. I know that this is a danger, and I am arguing against my own case. I am in the classic position that the more I speak, the more difficult it is for me to decide how to vote. I am seeking to make the point that I have an open mind on this subject, unlike the other 500 hon. Members who are not present. There are those of us who come to listen to these debates so that we may have a valid idea of what we are doing on this important provision. This matter is being brought up on a Thursday, it is a matter of supreme substance and it might well have gone through "on the nod". However, I shall resume my seat before I get into more trouble. I shall listen to the rest of the debate and make my decision later.

Mr. Rifkind: The clause in its present form shows a glaring gap in the procedures applied to EEC legislation. It seeks to implement, for all practical purposes, a European directive. An hon. Member who wishes to know what he is approving has no way of knowing, from an examination of this legislation, what is involved in the directive. I make no comments on the merits of the directive, but surely the least that we should require is that when a clause in a United King

dom Bill seeks to give legal effect to an EEC directive, that directive should appear somewhere in the Bill, at least as a schedule, so that hon. Members, without too much difficulty, can find out what they are being asked to implement.
When I first took an interest in this matter it took me some months to get a copy of the directive. That is not a satisfactory way of going about our proceedings. It has nothing to do with the merits of the issue, but it means that it is difficult for hon. Members who wish to take an interest in these matters, and those who may only now wish to understand what is involved, to appreciate the problems.

Mr. Nick Budgen: Surely it is much more serious than that. What about the position of the taxpayer? An hon. Member has an opportunity of getting the document, but a taxpayer has no such opportunity.

Mr. Rifkind: I do not entirely agree with my hon. Friend. A taxpayer can get the document. The point is that the House is being asked to give legal effect to a directive, but it is not easy to find what we have to give legal effect to. That situation could be changed without great difficulty, and I hope that the Government will consider the desirability of changing it in the near future.
I cannot agree with the interpretation of the right hon. Member for Down, South (Mr. Powell) of the effect of the clause. The Opposition amendments are those that I moved in Committee. I am aware of the necessity and desirability of ensuring the the rights that will be available under the directive should be restricted to the legitimate purposes for which the directive seeks the assistance of member States.
The right hon. Memeber painted a rather terrifying picture of confidential tax documents flying across the face of Europe. Tax documents will be made available to Paris, Bonn, Rome and possibly to Ankara and Madrid, but they will also be coming in the reverse direction—to London. The question is not simply that British tax documents may be flying around the Continent, but whether, in a Community that will continue to exist—whether the right hon. Member for Down, South and others like


it or not—it is reasonable or unreasonable that there should be facilities for exchanging tax information in order to pursue the common objective of preventing tax evasion. I do not believe that that is an unreasonable objective, and in so far as the directive seeks that objective it is not objectionable.
Reference has been made to double taxation agreements. By chance, the United Kingdom already has such agreements with every other member of the EEC and, to a large extent, those agreements already provide for the exchange of such information. In certain technical ways, there are differences. The process is not spontaneous, as is the method provided for, in some respects, by the directive, but the basic principle that tax documents will go from the United Kingdom to other States in the EEC and to other parts of the world is not an extraordinary new principle.

Mr. Jay: If the hon. Gentleman were right in thinking that all that is to be done under the clause can be done already through double taxation arrangements, what is the necessity for the clause?

Mr. Rifkind: Although the United Kingdom has double taxation agreements with other member States of the EEC, that does not necessarily apply to all the members of the Community. The directive is an EEC document and although, to a substantial extent, it is unnecessary in the United Kingdom, it is not unnecessary if we are trying to get a common agreement among the States of the EEC.
I did not suggest that there was no difference between the double taxation agreements and the provisions of the directive. I said that, to a large extent, the powers provided in the directive already exist for the United Kingdom in the double taxation agreements. This was confirmed by the Financial Secretary, who told me recently:
The information which Clause 62 would enable the Inland Revenue to disclose to the competent authorities of the other member countries of the EEC is very largely information which they are able already to disclose to the competent authorities of the countries with which the United Kingdom has agreements for the relief of double taxation … The United Kingdom has such agreements with all the other EEC member countries."—[Official Report, 3rd May 1978; Vol. 949, c. 194.]
To a large extent—I put it no higher than that—we already provide that in

formation, and no sacred principle is being breached. We are not providing for the first time that the tax documents of British citizens will be leaving our shores for tax purposes; that already happens, not just with the EEC, but with the tens of countries around the globe with whom we have double taxation agreements. It is wrong to suggest that this is a fundamental breach of the rights of the citizens which has never before been contemplated.
Not only has it been contemplated before; it has been done, without a squeak of protest from anyone. Indeed, there should not have been any protests, because it is a reasonable, civilised and sensible approach to the mutual tax arrangements of the countries concerned.
9.30 p.m.
I turn to the specific point in respect of which I share the criticisms of many hon. Members who have expressed their views both in Standing Committee and on the Floor of the House. It is desirable that there should be an EEC directive to enable the transfer of information between member States and the Community. However, every precaution should be taken to ensure that the information that is provided to other member States should, first, have the same degree of confidentiality that that information would have in the United Kingdom, and, secondly, be capable of being used only for tax purposes or for purposes of litigation related to fiscal matters.
It was on those two aspects that I tabled amendments in Standing Committee. At that stage the Government were hostile to the proposition. They said that it was not necessary. They said that it was pointless. They said that the confidentiality presently provided was satisfactory, and that there was no problem and no cause for concern.
The House will be able to imagine my surprise and amusement when the amendments on Report were tabled and I found on the Order Paper an amendment that had exactly the same effect as my amendments—in other words, to ensure that any information provided would have the same degree of confidentiality.
I am not certain why the Financial Secretary was unable to accept the drafting of the original amendment that we debated in Committee, but I am delighted


that the Government are to accept the effect of that amendment. That marks significant progress. That is all the more reason why we should be disappointed and the House concerned that, as yet, the Government have not accepted the second branch of the argument. In some respects it is an even more important point of principle. It is one that should concern hon. Members on both sides of the Chamber irrespective of their attitude towards British membership of the Community. I am a strong supporter of British membership and I do not want to reduce or modify it in any way.
So far the Government have not announced any acceptance of the second objective, which is to ensure that any information provided under the directive should not be capable of being used for purposes other than taxation or litigation related to taxation. On first glance at the directive it seems that our concern on this issue is unnecessary and that we are creating false alarms. For example, one section of article 7(1) declares that information provided
shall in no circumstances be used other than for taxation purposes or in connection with judicial proceedings or administrative proceedings involving sanctions undertaken with view to, or in relation to, the making or reviewing of tax assessment.
That is categoric and specific. If that were all that was to be found in the directive, there would be no need for amendment no. 9. However, the sad fact is that if we turn to the next page, to article 7(3), we find that it is stated:
Notwithstanding paragraph 1"—
that is the paragraph that I have quoted—
the competent authorities of the member states providing the information may permit it to be used for other purposes in the requesting state, if, under the legislation of the informing state, the information could, in similar circumstances, be used in the informing state for similar purposes.
That is rather complicated, but the article is providing that if, for example, in the United Kingdom the Commissioners of the Inland Revenue are permitted to allow information provided for tax purposes to be used other than for tax purposes they may give permission to the other European state also to use information provided for other tax purposes.
In that respect the article goes way beyond the double taxation agreements that have been arranged with any other States as far as I am aware. In answer to a Question that I put to the Financial Secretary on the scope and extent of double taxation agreements with EEC States he replied on 17th May:
The agreements vary to some extent but at the widest"—
that is the crucial phrase—
they limit the exchange of information to that necessary for carrying out the law relating to the taxes which are the subject of the relevant agreement."—[Official Report, 17th May 1978; Vol. 950, c. 230.]
That is satisfactory and desirable, but that is not the position with the EEC directive. The question becomes: can the United Kingdom Commissioners of Inland Revenue at present allow information that they receive to be used in the United Kingdom for other tax or related tax matters?

Mr. Bryan Gould: Is there not a further point that makes the argument for the amendment even stronger—that it is at least arguable that the clause does not incorporate the directive? It simply defines the information which is exempt from the requirement of confidentiality by reference to the directive. If that is what the clause does, it follows that the provisions, conditions and safeguards provided for in the directive will not be part of the domestic law and therefore will have to be dealt with separately.

Mr. Rifkind: To a large extent I agree with the hon. Gentleman. He is correct in saying that the clause refers only to issues of confidentiality. It makes no reference to the purposes for which the information may be used. The information that is provided, given the amendment to be accepted by the Government, must have the same degree of confidentiality. But nothing that has yet been accepted by the Government or that is in the clause in any way limits the purposes for which confidential information may be used.
The point that I was about to make when the hon. Member for Southampton, Test (Mr. Gould) intervened was that at present the United Kingdom Commissioners of Inland Revenue may in


certain limited circumstances make information available other than for tax matters. I understand that they can make information available both to the Customs and Excise and to the Department of Health and Social Security.
These are very restricted and strictly controlled matters. However, the principle exists. Therefore, it is possible that the United Kingdom Commissioners of Inland Revenue might have the power, though they might choose not to use it, to permit tax information sent to a member state to be used other than for tax matters. Would it be obnoxious if they used that power? Whether or not it is obnoxious in terms of the general principle involved, in my view it goes beyond this directive.
The right hon. Member for Down, South is not very impressed with or concerned about the contents of the preamble to the directive, but I think that it is legitimate to look at the preamble to ensure that the powers granted by the House do not go beyond the purpose of the directive.
The preamble states, as one of the purposes of the directive:
whereas it is therefore necessary that the Member States receiving such information should not use it, without the authorisation of the Member State supplying it, other than for the purposes of taxation or to facilitate legal proceedings for failure to observe the tax laws of the receiving State".
In other words, the purpose of the directive is limited to the objective of preventing tax evasion and of providing information to that end. Therefore, even though the Government believe that the Commissioners of Inland Revenue would not wish to use the power for that purpose, it is right and proper for the House to introduce the safeguard proposed to amendment no. 9 to ensure that there is no doubt on the matter.
We know that the Government believe amendment no. 8 to be unnecessary, but they have agreed that it should be included. On the same basis, for the avoidance of doubt, there is an overwhelming argument for including amendment no. 9. The Government concede that no harm would be done. At least it is an unnecessary amendment; at most it will be an important provision for the protection of the citizen.
Certain hon. Members on both sides of the House are using this debate to restate their basic hostility towards or, indeed, support for our membership and development of the Community in one or other direction. It is legitimate for them to do that. But, even for those of us who are strong supporters of British membership of the Community and who do not believe that the debate should be about the fact of our continued membership, that is no reason why we should not ensure that, when information that is relevant to the personal affairs of our fellow citizens is legitimately and rightly provided to other member States, we impose such safeguards as are consistent with our obligations to honour the commitments that have been entered into with the other member States—safeguards that do not infringe, inhibit or prevent any of the legitimate purposes for which the directive has been established, and which will at least ensure that there is no abuse of the directive and no danger of improper use of information which is private to the citizen and which is provided under the directive.
I hope that whatever hon. Members think about the Community they will agree that this amendment is a useful, desirable and helpful addition to the Bill.

Mr. John Cronin: The hon. Member for Edinburgh, Pent-lands (Mr. Rifkind) made an interesting and well-informed speech. My only criticism is that it lacked the desirable quality of brevity. Many hon. Members are anxious to return to their constituencies as soon as possible. I propose to co-operate with that wish by being as brief as possible—briefer than the subject deserves.
My hon. Friend the Member for Swindon (Mr. Stoddart) and others have done a useful service by drawing this matter to our attention. It is most undesirable that there should be any move to give to the EEC Commission or Council powers which they do not already possess. It is particularly important that there should be no move towards any form of federalism.
The EEC is unpopular, and rightly so. The EEC budget is a complete shambles, the common agricultural policy is a laughing stock throughout Europe and


it is necessary that there should be stringent reforms in the near future. Any attempt to give extra powers to the EEC without careful scrutiny should not be tolerated. I hope that my right hon. Friend the Financial Secretary will give a detailed explanation of the effect of clause 63. I hope he will assure us that it is not an attempt to move towards a form of joint taxation system in the EEC.
What criterion should we use when examining the clause? The obvious criterion is that of the national interest alone. It would be most undesirable if this clause or similar legislation were used for the purpose of fighting the old battles, which are long finished, about whether Britain should be in the EEC. The right hon. Member for Down, South (Mr. Powell) suggested that the old battles were still in his mind.
There is no escape from the fact that tax avoidance and evasion is occurring on a large scale through the vehicle of European countries or the Channel Islands and the Irish Republic. This must be stopped. We owe it to our constituents to put an end to tax avoidance and evasion as far as is possible. Anything which is gained by tax avoiders and evaders comes out of the pockets of our constituents and of all of us. We must examine the problem carefully.

Mr. Budgen: Does the hon. Member agree that if the House decides to do away with the whole principle of confidentiality, it should be done directly and openly after proper and full debate and not by a side wind?

Mr. Cronin: We are considering the matter openly. That is why there are so many hon. Members in the Chamber.
Not only are multinational companies evading and avoiding tax on a large scale, but companies that trade only in the United Kingdom are avoiding tax. Private individuals are doing the same thing on a large scale, either directly in European countries or through intermediate countries.
The main objects of the directive are desirable. Article 1 deals with the exchange of information which will help in the collection of taxes. It is in the interests of us all that anything that makes the collection of taxes more efficient should be encouraged.
The other highly important section of the directive is that which provides that the competent authorities, without request, should forward information to other countries where it appears that the other countries are losing tax that they should receive. This is the most important part of the directive for stopping the evasion and avoidance of tax among the various European countries, and it should be welcomed.
The directive is a desirable move towards the more efficient collection of taxes. It will benefit this country and is. therefore, in the national interest. We should have from the Financial Secretary, however, a careful and detailed explanation of how it will work.

9.45 p.m.

Mr. Dykes: Partly because of the quality of the speech by my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) and partly because of the way he outlined his misgivings on the potential use of exchanged information, I do not need to go into detail on this issue. It is a matter that we should deal with carefully. There is a clash of sentiments and views on each side of the House on the clause which transcends the by now historical and time-honoured views that are held about the rights or wrongs of membership of the EEC.
Although there appears to be a general wish to retain confidentiality, there is something to be said for the opening remarks by the hon. Member for Birmingham, Perry Barr (Mr. Rooker)—I hope do not embarrass or discomfort him by saying so—that, if we switched completely to an open tax system in which tax figures were published for individuals, companies and all tax-paying entities, this would create a different position which in due course might command public support.
It is reasonable, however, that we should garner the impression that the 'overwhelming majority of the public, even if they are worried about tax avoidance and evasion by companies or individuals, would none the less continue to support the principle of confidentiality. Therefore, hon. Members should be satisfied to the extent that clause 63 can adequately cover that principle and provide within reasonable, known and agreed procedures among the member States a legitimate exchange of information


when the fiscal authorities of member States need it to ensure that proper taxes are paid at proper rates in the proper legal manner.
It is not necessary, therefore, for us to go back to the fundamental debates about whether we should be a member of the Community—the kind of thing that the right hon. Member for Down, South (Mr. Powell) with monotonous repetition, but with great skill and adroit speeches, does repeatedly. However, I believe that he does the House and the country a disservice in raising unnecessary fears and in espousing excessively alarmist arguments about the implications of our membership in ail sorts of spheres.
We knew, as the country knew—the referendum result endorsed it—that by joining the Community many legislative proposals would come along of which at that stage we know nothing. But we knew that they would be within the treaty framework, safeguarded by the interrelationship of the institutions and with the final legal protection of the European Court as the ultimate court of interpretation—

Mr. Gow: But not this House.

Mr. Dykes: This House is able to exercise its will in giving Ministers proper guidance and advice in advance of Community decisions. That would happen if only the Government organised the scrutiny procedure properly on all aspects of Community legislation. It is a pity that that is not tackled, as the House would then be doing its job more efficiently and to the satisfaction of the public. We know that these procedures are abortive because the Executive lacks the will to put them fully into practice in a way which would please hon. Members, irrespective of our views on the Common Market.
Like my hon. Friend the Member for Pentlands, and not having been a member of the Committee, I ask the Financial Secretary, seriously to consider adopting amendments nos. 8 and 9. Together with the original clause and the coincidence of the Government's Amendment no. 98 on reciprocal confidentiality, they would provide the essential safeguards that we need to make the clause effective for the public and to provide the proper reciprocal tax information-sharing

that we need throughout the Community and not only bilaterally between member States which happen to have mutual tax treaties. I reiterate that plea and hope that the Financial Secretary will satisfy the House on a very strong demand which comes from the Government side as well as from this side.
I would apologise to the hon. Member for Swindon (Mr. Stoddart) if he were here for the fact that I was not present for his initial remarks, but I think that I heard most of his speech. I heard him say that the United Kingdom would be sent to the European Court, that a dreadful fate would befall us and that you. Mr. Speaker, might be threatened with the court passing sentence on you. I could go into more lurid detail, but I deliberately refrain.
However, the hon. Member also wilfully misled the House and the public—I do not like to use that phrase, but it is what he did—because he did not finish up with the obvious accompaniment that taking a member State to the European Court because the Commission or, in certain limited circumstances, the Council of Ministers would feel that it was in breach of an agreed piece of Community legislation, passed and ratified by all the member States, would mean that the European Court would consider all the factors, including the relationship of that member State's own domestic legislation to the agreed Community instrument. There is no way in which the hon. Member could anticipate the court's judgment in those circumstances.
The public should be given the proper information on what the European Court means—namely, that it provides protection for the public throughout the member States, so that Community law can be legally and properly upheld. It would therefore be entirely wrong for any hon. Member to assume that the European Court would automatically come down, almost without considering the case, on the side of the Commission and against the member State. It could work the other way round as well.
In that connection, one would have to bear in mind that the original legislation had been agreed by the supreme legislative body in the Community, the Council of Ministers, empowered by the Governments of the member States. That, too,


provides the initial step in the legislative procedure of the Community which in tax and other legislation eminently satisfies the British public. It is a great shame that it does not satisfy the right hon. Members for Battersea, North (Mr. Jay) and Down, South.

Mr. Gow: The amendments and the clause raise the whole issue of the relationship of this House and the Government to the European Economic Community. In Committee the following question was put to the Financial Secretary:
Will the right hon. Gentleman explain one point which is crucial to the vote that we shall be taking shortly? In the view of the Government, what would be the consequence for the United Kingdom Government and the United Kingdom Parliament if this Committee, and, later, the House, were to remove Clause 62 from the Bill?
I should explain that the clause was then clause 62, although it is now clause 63. The Financial Secretary replied:
We should be in breach of our obligations and would be taken to the European Court in due course."—[Official Report, Standing Committee A, 21st June 1978; c. 1653.]
I wish to challenge that proposition. I wish to differentiate between legislation which comes from Brussels, which in the Government's view is automatically the law of this country, and directives issued from Brussels, which require further legislation by this House. Clearly, in the Government's view the directive that we are seeking to enact in our law is not one that has effect without further legislation by this House. If the Government disagreed with that proposition the clause would be unnecessary.
Article 12 of the directive provides:
Member States shall bring into force the necessary laws, regulations and administrative provisions in order to comply with this Directive not later than 1 January 1979 and shall forthwith communicate them to the Commission.
That is the final article, although one may read on to the terrifying last words:
This Directive is addressed to the Member States. Done at Brussels, 19 December 1977.
Nevertheless, the Government, in interpreting the directive as being obligatory on them, have involved themselves in a paradox, because the clause is the subject of an amendment by the Government themselves. By tabling an amendment they are acknowledging their own power

to legislate the form in which effect is given to the directive.
But there is another matter to which I hope the Financial Secretary will address his mind. In my submission, the penultimate paragraph of the preamble means that it is not obligatory on the Government to implement the directive in our Finance Bill. It says:
Whereas a Member State which is called upon to carry out enquiries or to provide information shall have the right to refuse to do so where its laws or administrative practices prevent its tax administration from carrying out these enquiries or from collecting or using this information for its own purposes, or where the provision of such information would be contrary to public policy or would lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or"—
these are the words that I want to emphasise—
where the Member State for which the information is intended is unable for practical or legal reasons to provide similar information".
the directive is not obligatory. I do not believe that it is obligatory on the Government to enforce the directive. If the clause were removed from the Bill, in the Government's view we should be taken before the European Court. If that should happen, so be it. Nothing more underlines the surrender of the power of this House over taxation, over fiscal legislation, than the Government's attitude and the inclusion of the clause.
That is why I support the amendment in the name of the right hon. Member for Battersea, North (Mr. Jay). If we remove the clause, no violence will be done to our own fiscal legislation, and no violence will be done to the fiscal procedures of the Community. What we shall achieve if we remove it is the assertion of the supremacy of this House over fiscal and taxation matters. That is why I shall vote for the right hon. Gentleman's amendment.

10.0 p.m.

Mr. Peter Brooke: In the context of what I sometimes have to listen to in this House, there is an element of irony in the Member of Parliament representing the City rising to defend the Government over a clause relating to tax integrity. My hon. Friend the Member for Harrow, East (Mr. Dykes) referred to the paradox and the eddies that flow across the House


tonight in discussing the clause. Labour Members below the Gangway are frequent in their references to the multinationals and their iniquities. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) referred to them this evening.
I recall, before coming to this House, listening six or seven years ago to the American ambassador to OECD addressing an audience in Brussels in which he explained that OECD had looked, through a committee of the member States, at the problem of tax evasion by multinational companies within the OECD countries. He said that those member States had come to the conclusion, through that committee, that there was no need for multinational legislation and that national legislation was perfectly sufficient.
For those who are informed about these matters, there is keen awareness of the fact that teams of executives from the Inland Revenue go out to work with the IRS in Washington on matters relating to multinational companies around the world. It is an irony that the clause under discussion should be attacked by some Labour Members in the terms in which it has been. It is ironic for me to be defending the Government on a matter of tax integrity. I reiterate the words used by the Chief Secretary last night when he quoted the fanciful figure of £200 million. There are times when I think that all tax evasion and all tax avoidance are thought to take place in my constituency. Ultimately someone else pays. I am delighted that, through a clause like this, the system is being tightened up.

Mr. Robert Sheldon: Before replying to the detailed comments and the main arguments of the debate, there were two questions put to me with which I can deal at once. The right hon. Member for Down, South (Mr. Powell) asked about double taxation agreements and how they provided the means of disclosing taxation information to other countries. The basic legislative arrangement that allows this is section 518 of the Taxes Act 1970, which allows the Revenue to disclose information under double taxation agreements.
My right hon. Friend the Member for Battersea, North (Mr. Jay) asked about the directives. The directives could be amended only by a new directive, and

legislation would then be needed to implement the new directive. The tears that my right hon. Friend has in this respect are not justified.
My hon. Friend the Member for Swindon (Mr. Stoddart), in a well-researched and at times amusing speech, dealt with the problems that he saw arising from the merging of our tax system into a Community system. This was one of his major worries as I understood it. We are at the final stages of proceedings on a Finance Bill. The problems of achieving a comprehensive approach, even in our own legislation, and the problems that we have in dealing with these matters are nothing by comparison with the task of harmonisation. Even if the political will was immense, the task would be enormous. I do not believe that the worries of my hon. Friend the Member for Swindon or of my hon. Friend the Member for Loughborough (Mr. Cronin) concerned problems which we shall have to face for many years to come, if ever.
The hon. Member for Edinburgh, Pent-lands (Mr. Rifkind) was concerned about what he called legislation by reference. He thought of this as something fairly new. There are a number of precedents for this. There is one which he may recall and which arose as recently as last year. Section 11 of the Finance Act 1977 was, almost identically, a piece of legislation by reference. There is nothing particularly new about this, although I understand the hon. Gentleman's concern about certain other aspects of the legislation.
My hon. Friend the Member for Swindon argued that this is only the beginning of a number of other measures which we shall need to be considering, and which follow on from the clause. He cited value added tax and the directive which has been issued concerning that tax. The United Kingdom has reserved its position on this, and there will be further opportunity to examine the question at a later stage if it proceeds any further.
The right hon. Member for Down, South made his most important comment, I thought, when he expressed the fear that there would be an exchange of information without prior request, and that as a result of this the taxpayer would not know what was happening to information concerning his tax affairs. The right


hon. Gentleman saw the possibility of tax files being spread throughout Europe. This point was partly answered by the hon. Member for Pentlands, who pointed out that there is a two-way trade in this—

Mr. Powell: That is confirmation.

Mr. Sheldon: —and that there are advantages coming to us. The right hon. Gentleman referred to what he saw as the position of the United Kingdom taxpayer who might, as a result of this legislation, have to pay more tax in France. The right hon. Gentleman put this forward as something that he dreaded on behalf of his constituents. I must say to those Conservative Members who keep complaining about the high levels of taxation in this country and who compare them with the more modest levels of taxation as they see them in France that it would appear that there is probably more tax to be gained by this country, and, therefore, more value to be obtained by us, if what they say is true, from the implementation of this piece of legislation.

Mr. John Lee: Will my right hon. Friend go a little further? Is it, then, to be the Government's policy, as a kind of palliative reciprocal gesture, to indent for information about taxpayers whom they suspect to be defaulting abroad, as a sort of sweetener? The right hon. Member for Down, South (Mr. Powell), I think, muttered that it was confirmatory of his objection. It seems to me that that is the case.

Mr. Sheldon: I shall be dealing with these matters later on in my remarks.
Perhaps I may now deal with what the hon. Member for Pentlands said. He was particularly concerned about amendment no. 9. He recognised that amendment no. 8 is largely, although not entirely, met by Government amendment no. 98. Amendment no. 98 makes it clear that the Inland Revenue is not authorised to disclose the information unless it is satisfied that the tax authorities of the other member States are bound by or have undertaken to observe rules of confidentiality with respect to the information which are not less strict than those applying to it in the United Kingdom. Frankly, I believe, as I said in Committee, that this is not necessary, that this is included

within the directive and that the natural attitude of those preparing legislation is that they would usually prefer not to have two pieces of legislation saying much the same thing, because essentially when other words are used they are capable of misinterpretation.
My understanding is quite clear that in amendment no. 98 we are doing no more than to repeat the provisions that are in the directive itself. But I believe it is right that we should clarify those points on which there was considerable concern, and amendment no. 98, as I have indicated, was put down for this reason.

Mr. Gould: Is my right hon. Friend arguing that clause 63 incorporates the whole directive? If that is the case, will he explain how clause 63 achieves that?

Mr. Sheldon: Clause 63 implements the directive in the same way as section 11 of last year's Finance Act implemented the recovery of Customs and Excise duties under another directive. We have carried out the same sort of legislative operation.
The hon. Member for Pentlands, in speaking to amendment no. 9, felt that the directive was not sufficiently clear on this matter. He wanted the directive in certain cases to allow the receiving tax authority to go outside these limits if the providing tax authority consented. I see that the hon. Gentleman nods approval, because that is in the directive and it is in his amendment. I am happy to accept that particular amendment. [HON. MEMBERS: "Ah."] As I said before, in the same way as amendment no. 98 meets the same points as were put in the directive, so I believe that amendment no. 9 covers the same points as are also in the directive. If it is the wish of the House that this should be made crystal clear, I am happy to do so. I do not believe that it is necessary. I see certain problems in duplicating legislation, but if that is the wish of the House I am happy to accept that particular view.
The most important points which I should like to deal with were those put by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). He said that multinationals were very powerful, in many cases more powerful than some of the nation States. They are able to set criteria which, in certain cases, certain


countries have to accept or even compete against. The particular problem which my hon. Friend outlined is a problem for those who want to control the extent of tax avoidance and tax evasion, because this is becoming international and companies are already international, both in their operations and in their facilities, in regard to being able to make use of these particular channels.
It is wholly advantageous, wherever we can, to set up such a procedure. It need not be confined to the Community. If a proposal comes before us so that we can have a wider group of nations acting together to implement the kind of regulation about which we are now talking, so that there can be a wider exchange of information dealing with those taxes which are being evaded and avoided, I believe that that is wholly desirable and acceptable. In our debates yesterday, when we were talking about tax avoidance and not tax evasion, we accepted retrospection—something which this House does with a great deal of distaste. We accepted that after a very long debate. Here we have tax evasion, and we are trying to stop it by exchanging information. It is surprising that certain of my hon. Friends and certain hon. Members cannot find it within their power to extend this provision so that we can obtain the information which we believe will be very valuable. Because of that, I believe that we should accept the clause and amendment no. 98.

Mr. Jay: Before my right hon. Friend sits down, can he answer one question? Is the effect of the clause confined to tax payments by multinational companies, or does it also affect individual taxpayers?

Mr. Peter Rees: I almost hesitate to intervene, since the debate has now narrowed into a rather partisan dispute between the Financial Secretary and his right hon. and hon. Friends. It has been an interesting, unusual and wide debate. It has been interesting for Conservative Members to observe the dislike of Labour Members of the EEC and our membership of it, tempered by their detestation of tax avoidance and tax evasion. It will be interesting to see which sentiments come uppermost if the House divides on the clause. The ambivalence was most notable in the speech of the hon. Member for Birmingham, Perry Barr (Mr.
Rooker), whose absence from our debates in Standing Committee we regretted greatly, because he would have made a very special and original contribution.
On this occasion we are considering how far we are required by our obligations under the directive to enact this clause and how far the provisions of the directive oblige us to breach a long established principle of confidentiality between the Inland Revenue and the taxpayer.
10.15 p.m.
I do not think that it was necessary to embark upon a wide debate on our obligations or the consequences of our membership of the EEC. At certain points, Mr. Speaker, there were even speculations about your own future. I am happy to see you here and in good health, and I am sure that we shall rally round you if there should be any question of your being dragged to Tower Hill, or to some equivalent place. I do not think that that arises on the debate on this clause.
Although I am a convinced adherent of our membership of the EEC, I find that the pretext for the enactment of the directive a little specious. I am not persuaded that the practices of tax evasion and tax avoidance extending across the frontiers of member States will be liable to bring about distortion from capital movements and conditions of competition.
I wonder whether the Financial Secretary stood out with sufficient robustness against the other members of the Council of Ministers in defending British interests on this matter. But, again, perhaps this is not the moment to examine too closely the role played by the right hon. Gentleman. He may be under certain pressure from his right hon. and hon. Friends in that regard, and I have no wish to make his position more difficult than it is at present.
However we stand in our regard for the EEC, we are entitled to consider whether the directive is best implemented by this clause. We are entitled to consider whether the clause does not go a little too wide and whether its scope should not be narrowed.
The House will recognise that it is a very long established principle of our fiscal code that what is disclosed by a taxpayer to the Inland Revenue is a matter of complete confidence. With one


or two very slight exceptions, which my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) ventilated and in so doing did the House a great service, there is absolute confidentiality. This is embodied in the oath that members of the Board of Inland Revenue and inspectors of taxes take when they assume office, as the right hon. Member for Down, South (Mr. Powell) pointed out.
It was because the Opposition felt that the clause went a little wide and that in a certain regard information which had been given in confidence to the Inland Revenue might be disclosed for purposes which went beyond mere matters of tax in the countries concerned that in Committee we tabled and debated with some vigour the two amendments which have been reproduced on today's Notice Paper. The Financial Secretary resisted those two amendments bitterly with a wealth of specious argument. Fortunately wiser counsels have prevailed and, having put down amendment no. 98, which reproduces in every particular the provisions of amendment no. 8, we are happy that the right hon. Gentleman has recognised the force of our arguments.
But that did not entirely meet our objections. We feel that if any information is to be passed over, it must be only for the specific purposes of collecting or determining tax in the countries concerned. There is a respectable precedent for that in the double tax conventions which have been negotiated on our behalf by Administrations of various complexions. This point has been amply made in the amendment moved by my hon. Friend the Member for Pentlands and at least this has been accepted, if somewhat grudgingly, by the Financial Secretary. Therefore, perhaps the Financial Secretary has gone far enough to meet the specific fiscal points.
The hon. Member for Swindon (Mr. Stoddart) touched on the wider, more fundamental objection to the clause. He sees it as an advance in surrendering our sovereignty. This was echoed by my hon. Friend the Member for Eastbourne (Mr. Gow), whose views are well known.
I do not believe that in enacting this clause we shall surrender one whit of fiscal sovereignty. It is just a matter of passing over information. By our amendments, we have narrowed the clause and we are happy that the information passed

will be strictly confined and obligations will be imposed on the recipient country.
I believe that we are honour bound to discharge the obligations assumed for us—perhaps a little carelessly and heedlessly—by the Financial Secretary. But in his muddling way he is trying to do his best for the country. Therefore, I leave it to his right hon. and hon. Friends to determine whether he has failed in his duty.
National honour and, indeed, perhaps national interest say that we should attempt to discharge the obligations that the Financial Secretary has assumed for us by making us adherents to this directive. Having achieved what we set out to do in amendments nos. 9 and 98, we on this side of the House shall give him modest encouragement in his battles ahead with his hon. Friends.

Mr. Jay: I rise briefly because the Financial Secretary did not answer my question. I wanted to know whether the clause would in effect apply only to the multinationals, about which he talked a lot, or to ordinary individual taxpayers as well. He did not reply and therefore I assume that it applies to the generality of taxpayers and not just to the multinationals, which are a red herring in this debate.
I welcome the amendments moved by both the Government and the Opposition, but I hope that hon. Members will realise that these amendments do not take us very far. They require the Inland Revenue to obtain undertakings from the tax authorities of other countries. This House can put a legal obligation on the Inland Revenue but it cannot put a legal obligation on the tax authorities of other countries to carry out the undertakings that they have given. Therefore, it does not impress me very much.
There is one outstanding point that no one has mentioned yet in the debate. It is still the legal position that the Inland Revenue cannot disclose the particulars of an individual's tax affairs, even to the Chancellor of the Exchequer or Treasury Ministers. Unless my right hon. Friend denies this, I shall assume that it is true. It has always been the case since income tax was first introduced and, as far as I know, it is still the case. Now it is proposed that the Inland Revenue should


hand over details of individual taxpayers' affairs to foreign tax authorities when it cannot hand them over to the Chancellor of the Exchequer in this country. I do not think that any case has been made

out for that proposition and therefore I hope that the House will reject it.

Question put, That the amendment be made:

The House divided: Ayes 81, Noes 209.

Mahon, Simon
Rees, Rt Hon Merlyn (Leeds S)
Thomas, Jeffrey (Abertillery)


Mallalieu, J. P. W.
Renton, Rt Hon Sir D. (Hunts)
Thomas, Mike (Newcastle E)


Marshall, Dr Edmund (Goole)
Rifkind, Malcolm
Tinn, James


Marshall, Jim (Leicester S)
Roberts, Albert (Normanton)
Tomlinson, John


Meyer, Sir Anthony
Robertson, George (Hamilton)
Tomney, Frank


Millan, Rt Hon Bruce
Roderick, Caerwyn
Urwin, T. W.


Mills, Peter
Rodgers, Rt Hon William (Stockton)
Varley, Rt Hon Eric G.


Miscampbell, Norman
Rooker, J. W.
Walker, Harold (Doncaster)


Mitchell, R. C. (Soton, Itchen)
Roper, John
Walker, Terry (Kingswood)


Morris, Alfred (Wythenshawe)
Rose, Paul B.
Ward, Michael


Morris, Rt Hon J. (Aberavon)
Ross, Stephen (Isle of Wight)
Watkinson, John


Moyle, Rt. Hon. Roland
Ross, Rt Hon W. (Kilmarnock)
Weetch, Ken


Mulley, Rt Hon Frederick
Rowlands, Ted
Weitzman, David


Murray, Rt Hon Ronald King
Ryman, John
Wellbeloved, James


Newton, Tony
Sandelson, Neville
White, Frank R. (Bury)


Noble, Mike
Scott, Nicholas
White, James (Pollok)


Oakes, Gordon
Sever, John
Whitehead, Phillip


Ogden, Eric
Shaw, Arnold (Ilford South)
Whitlock, William


O'Halloran, Michael
Sheldon, Rt Hon Robert
Willey, Rt Hon Frederick


Orme, Rt Hon Stanley
Shore, Rt Hon Peter
Williams, Rt Hon Alan (Swansea W)


Ovenden, John
Silkin, Rt Hon John (Deptford)
Williams, Rt Hon Shirley (Hertford)


Owen, Rt Hon Dr David
Silkin, Rt Hon S. C. (Dulwich)
Wilson, William (Coventry SE)


Padley, Walter
Smith, Cyril (Rochdale)
Wood, Rt Hon Richard


Palmer, Arthur
Smith, Rt. Hon. John (N Lanarkshire)
Woodall, Alec


Pardoe, John
Snape, Peter
Woof, Robert


Park, George
Stallard, A. W.
Wrigglesworth, Ian


Parker, John
Steel, Rt Hon David
Young, David (Bolton E)


Pendry, Tom
Stewart, Rt Hon M. (Fulham)



Penhaligon, David
Stott, Roger
TELLERS FOR THE NOES:


Phipps, Dr Colin
Strang, Gavin



Prescott, John
Summerskill, Hon Dr Shirley
Mr. Donald Coleman and


Price, William (Rugby)
Taylor, Mrs Ann (Bolton W)
Mr. James Hamilton.


Radice, Giles

Question accordingly negatived.

Amendments made: No. 98, in page 56, line 33, at end insert—
'(2) Neither the Commissioners nor an authorised officer shall disclose any information in pursuance of the said Directive unless satisfied that the competent authorities of the other State are bound by, or have undertaken to observe, rules of confidentiality with respect to the information which are not less strict than those applying to it in the United Kingdom.'.—[Mr. Bates.]

No. 9, in page 56, line 33, at end insert—
'Nothing in this section shall permit the Commissioners of Inland Revenue or an authorised officer of those Commissioners to authorise the use of information disclosed by virtue of the said Directive other than for the purposes of taxation or to facilitate legal proceedings for failure to observe the tax laws of the receiving state.'.—[Mr. Peter Rees.]

Schedule 11

CUSTOMS AND EXCISE CONSOLIDATION AMENDMENTS

Amendment made: No. 185, in page 86, line 42, at end insert—
25. In section 5 of the Import Duties Act 1958 (reliefs from import duties) after subsection (1) there shall be inserted the following subsection:—
(1A) In this section and in section 6 below 'import duty' includes duty charged under the Customs Duties (Dumping and Subsidies) Act 1969 and under section 6(1) of the Finance Act 1978".

26. In section 13(4) of the Import Duties Act 1958 and in section 15(2) of the Customs Duties (Dumping and Subsidies) Act 1969 (beginning of 28 day period for orders), for the words "twenty-eight days after" there shall be substituted the words "the period of 28 days beginning with".'.—[Mr. Robert Sheldon.]

Clause 66

SHORT TITLE, INTERPRETATION, CONSTRUCTION AND REPEALS

Amendment made: No. 132, in page 57, line 21, after 'Part I', insert—
'(except sections (Vehicles excise duty: Great Britain) and (Vehicles excise duty: Northern Ireland)'.—[Mr. Bates.]

New Schedule

RELIEF FOR GAINS LESS THAN £9,500

Preliminary

1. In this Schedule references to any subsections not otherwise identified are references to subsections of section 36 of this Act.

Husband and wife

2.—(1) For any year of assessment during which a married woman is living with her husband subsections (1) to (4) shall apply to them as if the amounts of £1,000, £5,000 and £600 were divided between them—

(a) in proportion to their respective taxable amounts for that year (disregarding for this purpose paragraphs (a) and (b) of subsection (4)); or


(b) where the aggregate of those amounts does not exceed £1,000 and allowable losses accruing to either of them in a previous year are carried forward from that year, in such other proportion as they may agree.

(2) Sub-paragraph (1) above shall also apply for any year of assessment during a part of which (being a part beginning with 6th April) a married woman is living with her husband but—

(a) her taxable amount for that year shall not include chargeable gains or allowable losses accruing to her in the remainder of the year and
(b) subsection (1) to (4) shall apply to her (without the modificatin in sub-paragraph (1) above) for the remainder of the year as if it were a separate year of assessment.

3.—(1) For any year of assessment during which or during a part of which (being a part beginning with 6th April) the individual is a married man whose wife is living with him and in relation to whom paragraph 3(1) of Schedule 10 to the Finance Act 1965 applies subsection (7) shall apply as if—

(a) the chargeable gains accruing to him in the year included those accruing to her in the year or the part of the year; and
(b) all the disposals of assets made by her in the year or the part of the year were made by him.

(2) Subsection (7) shall not apply for any year of assessment during which or during a part of which (being a part beginning with 6th April)—

(a) the individual is a married man whose wife is living with him hut in relation to whom the said paragraph 3(1) does not apply; or
(b) the individual is a married woman living with her husband.

Personal representatives

4. For the year of assessment in which an individual dies and for the two next following years of assessment, subsections (1) to (4) and (7) shall apply to his personal representatives as they apply to an individual.

Trustees

5.—(1) For any year of assessment during the whole or part of which settled property is held on trusts which secure that, during the lifetime of a mentally disabled person or a person in receipt of attendance allowance, any

Division No. 270]
AYES
[10.37 p.m.


Adley, Robert
Biggs-Davison, John
Burden, F. A.


Aitken, Jonathan
Body, Richard
Butler, Adam (Bosworth)


Alison, Michael
Boscawen, Hon Robert
Carlisle, Mark


Amery, Rt Hon Julian
Bottomley, Peter
Chalker, Mrs Lynda


Atkins, Rt Hon H. (Spelthorne)
Bowden, A. (Brighton, Kemptown)
Channon, Paul


Atkinson, David (B'mouth, East)
Boyson, Dr Rhodes (Brent)
Churchill, W. S.


Awdry, Daniel
Braine, Sir Bernard
Clark, Alan (Plymouth, Sutton)


Bain, Mrs Margaret
Brittan, Leon
Clarke, Kenneth (Rushcliffe)


Baker, Kenneth
Brocklebank-Fowler, C.
Cooke, Robert (Bristol W)


Banks, Robert
Brooke, Hon Peter
Cope,John


Bell, Ronald
Brotherton, Michael
Cormack, Patrick


Bendall, Vivian
Brown, Sir Edward (Bath)
Costain, A. P.


Bennett, Sir Frederic (Torbay)
Bryan, Sir Paul
Craig, Rt Hon W. (Belfast E)


Bennett, Dr Reginald (Fareham)
Buck, Antony
Crowder, F. P.


Berry, Hon Anthony
Budgen, Nick
Dean, Paul (N Somerset)


Biffen, John
Bulmer, Esmond
Dodsworth, Geoffrey

of the property which is applied, and any income arising from the property, is applied only or mainly for the benefit of that person, subsections (1) to (4) and (7) shall apply to the trustees of the settlement as they apply to an individual.

(2) In this paragraph "mentally disabled person" means a person who by reason of mental disorder within the meaning of the Mental Health Act 1959 is incapable of administering his property or managing his affairs and "attendance allowance" means an allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975.

6.—(1) For any year of assessment during the whole or part of which any property is settled property, not being a year of assessment for which paragraph 5(1) above applies, subsections (1) to (4) and (7) shall apply to the trustees of a settlement as they apply to an individual but with the following modifications.

(2) In subsections (1), (4) and (7) for "£1,000" there shall be substituted "£500".

(3) For subsections (2) and (3) there shall he substituted—
(2) If an individual's taxable amount for a year of assessment exceeds £500 the amount of capital gains tax to which he is chargeable for that year shall not exceed one-half ot the excess.

(4) In subsection (7) for "£5,000" there shall be substituted "£2,500".

(5) This paragraph applies where the settlement was made before 7th June 1978.'.—[Mr. Bates.]

Brought up, and read the First and Second time.

Amendment (c) proposed to the proposed schedule, to leave out
'Where the settlement was made before June 1978'
and insert
'Whenever the settlement was made'.—[Mr. Lawson.]

Question put, That the amendment made:—

The House divided: Ayes 241, Noes 257.

Drayson, Burnaby
King, Tom (Bridgwater)
Renton, Tim (Mid-Sussex)


Durant, Tony
Kitson, Sir Timothy
Rhodes James, R.


Dykes, Hugh
Knight, Mrs Jill
Rhys Williams, Sir Brandon


Eden, Rt Hon Sir John
Knox, David
Ridley, Hon Nicholas


Edwards, Nicholas (Pembroke)
Lamont, Norman
Ridsdale, Julian


Elliott, Sir William
Langford-Holt, Sir John
Rifkind, Malcolm


Emery, Peter
Latham, Michael (Melton)
Roberts, Wyn (Conway)


Eyre, Reginald
Lawrence, Ivan
Rodgers, Sir John (Sevenoaks)


Fairbairn, Nicholas
Lawson, Nigel
Rossi, Hugh (Hornsey)


Farr, John
Le Marchant, Spencer
Rost, Peter (SE Derbyshire)


Fell, Anthony
Lester, Jim (Beeston)
Royle, Sir Anthony


Finsberg, Geoffrey
Lloyd, Ian
Sainsbury, Tim


Fisher, Sir Nigel
Loveridge, John
St. John-Stevas, Norman


Fletcher-Cooke, Charles
Luce, Richard
Scott, Nicholas


Fookes, Miss Janet
McCrindle, Robert
Scott-Hopkins, James


Forman, Nigel
Macfarlane, Neil
Shaw, Giles (Pudsey)


Fox, Marcus
MacGregor, John
Shaw, Michael (Scarborough)


Galbraith Hon T. G. D.
MacKay, Andrew (Stechford)
Shelton, William (Streatham)


Gardiner, George (Reigate)
Macmillan, Rt Hon M. (Farnham)
Shepherd, Colin


Gardner, Edward (S Fylde)
McNair-Wilson, M. (Newbury)
Shersby, Michael


Gilmour, Rt Hon Sir Ian (Chesham)
McNair-Wilson, P. (New Forest)
Sims, Roger


Glyn, Dr Alan
Madel, David
Sinclair, Sir George


Godber, Rt Hon Joseph
Marshall, Michael (Arundel)
Skeet, T. H. H.


Goodhart, Philip
Marten, Neil
Smith, Dudley (Warwick)


Goodlad, Alastair
Mates, Michael
Smith, Timothy John (Ashfield)


Gorst, John
Mather, Carol
Speed, Keith


Gow, Ian (Eastbourne)
Maude, Angus
Spence, John


Gower, Sir Raymond (Barry)
Maudling, Rt Hon Reginald
Spicer, Jim (W Dorset)


Grant, Anthony (Harrow C)
Maxwell-Hyslop, Robin
Spicer, Michael (S Worcester)


Grieve, Percy
Mayhew, Patrick
Sproat, Iain


Griffiths, Eldon
Meyer, Sir Anthony
Stainton, Keith


Grylls, Michael
Miller, Hal (Bromsgrove)
Stanbrook, Ivor


Hail-Davis, A. G. F
Mills, Peter
Stanley, John


Hamilton, Archibald (Epsom &amp; Ewell)
Miscampbell, Norman
Steen, Arthory (Wavertree)


Hamilton, Michael (Salisbury)
Mitchell, David (Basingstoke)
Stewart, Rt Hon Donald


Hampson, Dr Keith
Moate, Roger
Stewart, Ian (Hitchin)


Hannam, John
Moore, John (Croydon C)
Stokes, John


Harrison, Col Sir Harwood (Eye)
More, Jasper (Ludlow)
Stradling Thomas, J.


Harvie Anderson, Rt Hon Miss
Morgan, Geraint
Tapsell, Peter


Haselhurst, Alan
Morgan-Giles, Rear-Admiral
Tebbit, Norman


Hastings, Stephen
Morris, Michael (Northampton S)
Temple-Morris, Peter


Havers, Rt Hon Sir Michael
Morrison, Charles (Devizes)
Thatcher, Rt Hon Margaret


Hawkins, Paul
Morrison, Hon Peter (Chester)
Thomas, Rt Hon P. (Hendon S)


Hayhoe, Barney
Neave, Airey
Townsend, Cyril D.


Higgins. Terence L.
Nelson, Anthony
Trotter, Neville


Hodgson, Robin
Neubert, Michael
van Straubenzee, W. R.


Holland, Philip
Newton, Tony
Vaughan, Dr Gerard


Hordern, Peter
Normanton, Tom
Viggers, Peter


Howell, David (Guildford)
Nott, John
Wakeham, John


Howell, Ralph (North Norfolk)
Onslow, Cranley
Walder, David (Clitheroe)


Hunt, David (Wirral)
Osborn, John
Walker, Rt Hon P. (Worcester)


Hunt, John (Ravensbourne)
Page, John (Harrow West)
Walker-Smith, Rt Hon Sir Derek


Hurd, Douglas
Page, Rt Hon R. Graham (Crosby)
Walters, Dennis


Hutchison, Michael Clark
Page, Richard (Workington)
Warren, Kenneth


Irving, Charles (Cheltenham)
Parkinson, Cecil
Weatherill, Bernard


James, David
Pattle, Geoffrey
Wells, John


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Percival, Ian
Whitney, Raymond


Jessel, Toby
Peyton, Rt Hon John
Wiggin, Jerry


Johnson Smith, G. (E. Grinstead)
Pink, R. Bonner
Wilson, Gordon (Dundee E)


Jones, Arthur (Daventry)
Prentice, Rt Hon Reg
Winterton, Nicholas


Jopling, Michael
Price, David (Eastleigh)
Wood, Rt Hon Richard


Joseph. Rt Hon Sir Keith
Raison, Timothy



Kellett-Bowman, Mrs Elaine
Rathbone, Tim
TELLERS FOR THE AYES:


Kilfedder, James
Rees, Peter (Dover &amp; Deal)
Sir George Young and


Kimball, Marcus
Reid, George
Lord James Douglas Hamilton


King, Evelyn (South Dorset)
Renton, Rt Hon Sir D. (Hunts)



NOES


Abse, Leo
Boothroyd, Miss Betty
Carter-Jones, Lewis


Anderson, Donald
Bottomley, Rt Hon Arthur
Cartwright, John


Archer, Rt Hon Peter
Boyden, James (Bish Auck)
Castle, Rt Hon Barbara


Armstrong, Ernest
Bradley, Tom
Clemitson, Ivor


Ashley, Jack
Bray, Dr Jeremy
Cocks, Rt Hon Michael (Bristol S)


Atkins, Ronald (Preston N)
Brown, Hugh D. (Provan)
Coleman, Donald


Atkinson, Norman (H'gey, Tott'ham)
Brown, Robert C. (Newcastle W)
Cook, Robin F. (Edin C)


Bagier, Gordon A. T.
Brown, Ronald (Hackney S)
Corbett, Robin


Barnett, Guy (Greenwich)
Buchan, Norman
Cowans, Harry


Barnett, Rt Hon Joel (Heywood)
Buchanan, Richard
Cox, Thomas (Tooting)


Bates, Alt
Callaghan, Rt Hon J. (Cardiff SE)
Craigen, Jim (Maryhill)


Bean, R. E.
Callaghan, Jim (Middleton &amp; P)
Crawshaw, Richard


Bidwell, Sydney
Campbell, Ian
Cronin, John


Bishop, Rt Hon Edward
Canavan, Dennis
Crowther, Stan (Rotherham)


Blenkinsop, Arthur
Carmichael, Neil
Cryer, Bob


Booth, Rt Hon Albert
Carter, Ray
Cunningham, G. (Islington S)







Cunningham, Dr J. (Whiteh)
Jones, Alec (Rhondda)
Robertson, George (Hamilton)


Davidson, Arthur
Jones, Dan (Burnley)
Robinson, Geoffrey


Davies, Bryan (Enfield N)
Judd, Frank
Roderick, Caerwyn


Davies, Rt Hon Denzil
Kerr, Russell
Rodgers, George (Chorley)


Davies, Ifor (Gower)
Kinnock, Neil
Rodgers, Rt Hon William (Stockton)


Davis, Clinton (Hackney C)
Lambie, David
Rooker, J. W.


Deakins, Eric
Lamond, James
Roper, John


de Freitas, Rt Hon Sir Geoffrey
Latham, Arthur (Paddington)
Rose, Paul B.


Dell, Rt Hon Edmund
Leadbitter, Ted
Ross, Stephen (Isle of Wight)


Dempsey, James
Lee, John
Ross, Rt Hon W. (Kilmarnock)


Dewar, Donald
Lestor, Miss John (Eton &amp; Slough)
Rowlands, Ted


Dormand, J. D.
Lever, Rt Hon Harold
Ryman, John


Douglas-Mann, Bruce
Lewis, Ron (Carlisle)
Sandelson, Neville


Dunnett, Jack
Loyden, Eddie
Sever, John


Dunwoody, Mrs Gwyneth
Luard, Evan
Shaw, Arnold (Ilford South)


Eadie, Alex
Lyon, Alexander (York)
Sheldon, Rt Hon Robert


Edwards, Robert (Wolv SE)
Lyons, Edward (Bradford W)
Shore, Rt Hon Peter


Ellis, John (Brigg &amp; Scun)
Mabon, Rt Hon Dr J. Dickson
Short, Mrs Renée (Wolv NE)


Ellis, Tom (Wrexham)
McCartney, Hugh
Silkin, Rt Hon John (Deptford)


English, Michael
McDonald, Dr Oonagh
Silkin, Rt Hon S. C. (Dulwich)


Evans, Fred (Caerphilly)
McElhone, Frank
Silverman, Julius


Evans, Ioan (Aberdare)
MacFarquhar, Roderick
Skinner, Dennis


Evans, John (Newton)
McGuire, Michael (Ince)
Smith, John (N Lanarkshire)


Ewing, Harry (Stirling)
MacKenzie, Rt Hon Gregor
Snape, Peter


Faulds, Andrew
McMillan, Tom (Glasgow C)
Spearing, Nigel


Fernyhough, Rt Hon E.
McNamara, Kevin
Spriggs, Leslie


Fitch, Alan (Wigan)
Madden, Max
Stallard, A. W.


Flannery, Martin
Magee, Bryan
Steel, Rt Hon David


Fletcher, Ted (Darlington)
Mahon, Simon
Stewart, Rt Hon M. (Fulham)


Ford, Ben
Mallalieu, J. P. W.
Stoddart, David


Fowler, Gerald (The Wrekin)
Marshall, Dr Edmund (Goole)
Stott, Roger


Fraser, John (Lambeth, N'w'd)
Marshall, Jim (Leicester S)
Strang, Gavin


Freeson, Rt Hon Reginald
Maynard, Miss Joan
Summerskill, Hon Dr Shirley


Freud, Clement
Meacher, Michael
Taylor, Mrs Ann (Bolton W)


Garrett, John (Norwich S)
Mikardo, Ian
Thomas, Dafydd (Merioneth)


Garrett, W. E. (Wallsend)
Millan, Rt Hon Bruce
Thomas, Jeffrey (Abertillery)


George, Bruce
Miller, Dr M. S. (E Kilbride)
Thomas, Mike (Newcastle E)


Gilbert, Rt Hon Dr John
Mitchell, Austin (Grimsby)
Thomas, Ron (Bristol NW)


Ginsburg, David
Mitchell, R. C. (Soton, Itchen)
Thorne, Stan (Preston South)


Golding, John
Molloy, William
Tilley, John


Gould, Bryan
Morris, Alfred (Wythenshawe)
Tinn, James


Grant, John (Islington C)
Morris, Rt Hon J. (Aberavon)
Tomlinson, John


Grocott, Bruce
Moyle, Roland
Tomney, Frank


Hamilton, James (Bothwell)
Mulley, Rt Hon Frederick
Torney, Tom


Hamilton, W. W. (Central Fife)
Murray, Rt Hon Ronald King
Urwin, T. W.


Hardy, Peter
Newens, Stanley
Varley, Rt Hon Eric G.


Harrison, Rt Hon Walter
Noble, Mike
Walker, Harold (Doncaster)


Hart, Rt Hon Judith
Oakes, Gordon
Walker, Terry (Kingswood)


Healey, Rt Hon Denis
Ogden, Eric
Ward, Michael


Heffer, Eric S.
O'Halloran, Michael
Watkins, David


Hooley, Frank
Orme, Rt Hon Stanley
Watkinson, John


Horam, John
Ovenden, John
Weetch, Ken


Howell, Rt Hon Denis (B'ham, Sm H)
Owen, Rt Hon Dr David
Weitzman, David


Howells, Geraint (Cardigan)
Padley, Walter
Wellbeloved, James


Hoyle, Doug (Nelson)
Palmer, Arthur
White, Frank R. (Bury)


Huckfield, Les
Pardoe, John
White, James (Pollok)


Hughes, Mark (Durham)
Park, George
Whitehead, Phillip


Hughes, Robert (Aberdeen N)
Parker, John
Whitlock, William


Hughes, Roy (Newport)
Parry, Robert
Willey, Rt Hon Frederick


Hunter, Adam
Pavitt, Laurie
Williams, Rt Hon Alan (Swansea W)


Irvine, Rt Hon Sir A. (Edge Hill)
Pendry, Tom
Williams, Rt Hon Shirley (Hertford)


Irving, Rt Hon S. (Dartford)
Penhaligon, David
Wilson, William (Coventry SE)


Jackson, Miss Margaret (Lincoln)
Phipps, Dr Colin
Wise, Mrs Audrey


Janner, Greville
Prescott, John
Woodall, Alec


Jay, Rt Hon Douglas
Price, C. (Lewisham W)
Woof, Robert


Jeger, Mrs Lena
Price, William (Rugby)
Wrigglesworth, Ian


Jenkins, Hugh (Putney)
Radice, Giles
Young, David (Bolton E)


John Brynmor
Rees, Rt Hon Merlyn (Leeds S)



Johnson, James (Hull West)
Richardson, Miss Jo
TELLERS FOR THE NOES:


Johnson, Walter (Derby S)
Roberts, Albert (Normanton)
Mr. Ted Graham and


Johnston, Russell (Inverness)
Roberts, Gwilym (Cannock)
Mr. Joseph Dean.

Question accordingly negatived.

Schedule agreed to, and added to the Bill.

Schedule 12

REPEALS

Amendments made: No. 133, in page 88, line 19, at end insert—
'1972 c. 41 The Finance Act 1972. Section 128(1).'.

No. 134, in page 88, line 24, at end insert—
'1976 c. 40. The Finance Act 1976. Section 13'.

No. 135, in page 88, line 27, at end insert—
'The repeals in the Finance Act 1972 and the Finance Act 1976 take effect on 1st December 1978'.

No. 97, in page 89, line 4, column 3, at beginning insert—
'In section 12 the word "female" wherever it occurs.
In section 13(a) the words "mother or other".
Section 18(3) and (4).'

No. 26, in page 90, line 16, at end insert—
'1966 c. 18. The Finance Act 1966. In Schedule 10, paragraph 2(3).'.

No. 27, in page 91, line 1, after 'in', insert 'the Finance Act 1966'.—[Mr. Bates.]

Motion made, and Question proposed, That the Bill be now read the Third time.

10.53 p.m.

Mr. Lawson: It is certainly encouraging to have such a full House at such a late hour on the Third Reading of the Bill after the long hours we have spent on it in Standing Committee and on Report. In many ways it has been a historic Finance Bill, not merely because it is the last such Bill of a dying Parliament and of a dying. Government but because this is a Bill which began with the basic rate of income tax at 34 per cent. and in which it now stands at 33 per cent.
Never before have an Opposition succeeded in bringing down the basic rate of income tax. In addition to that profound and unprecedented change, it is worth recalling that we also succeeded in raising the thresholds of the higher rates of tax by £1,000 in deference not merely to the needs of the country and the wishes of the people but to the expressed desire of the Chancellor of the Duchy of Lancaster, who had pointed out how grossly exorbit

ant were our high rates of tax and how they needed to be reduced at the earliest opportunity. We took that opportunity.
Those important and unprecedented changes followed the changes which the Opposition forced in last year's Finance Bill, when we substantially raised, and indexed, the thresholds—another historic event. The two Finance Bills together have undergone changes which I think no Finance Bills have undergone before.
There have also, this year, been a large number of minor changes of significance, in addition to the two major ones I have mentioned. Two Opposition amendments were accepted by the Government in Committee, and one Opposition new clause and two amendments were accepted on Report—one of them in the debate which has just ended. One Government new clause was added in Committee and 13 on Report, of which 11 were in response to points we pressed in Committee. No fewer than 87 Government amendments were introduced on Repoirt, of which the overwhelming majority were in fulfilment of commitments made to the Opposition in Committee.
That, of course, is why we have Committee stages, but it is a remarkable fact, and very rare, that over 100 clauses and amendments have been added and made to the Bill in response to pressure from the Opposition. Thus we have succeeded in improving the Bill far beyond what is appreciated outside the House.
We have also seen, as we have become accustomed to seeing in the summer months in recent years, the eruption of a major financial crisis, with bank rate hoisted to 10 per cent. and a savage curb on bank lending—all the usual paraphernalia of the credit squeeze in response to a financial crisis caused by the Government's improvidence. This crisis came at a time which, with curious accuracy, punctured the myth that all is well with the economy.
Indeed, the Prime Minister still likes to tell his audiences at home that all is well but he tells a different story in Bremen and other places abroad. There he says that the British economy is so weak that we cannot join with our Community partners unless they give us handouts. He goes with a begging bowl, complaining about the weakness of the same


British economy whose strength he seeks to parade in this Chamber. Regrettably, it is the account the right hon. Gentleman gives overseas which is the truthful picture.
Today marks the end of an era—an era of four years, 14 Budgets and six Finance Bills, which together have done untold damage to the economy, to industry, to commerce, to firms, to farms and, above all perhaps, to the individual's will to work, on which so much else depends.
We have been able to mitigate some of the worst evils of tht past two years, but to set the country on the right fiscal course something more than a new clause will be needed: it will need a new Government. Fortunately, we shall not now have long to wait. Fortunately, it is to that new Government that responsibility for next years' Finance Bill will fall.

11.0 p.m.

Mr. Gow: The Finance Bill 1978, shortly to become the Finance Act 1978, is the least damaging of all the Finance Bills and Finance Acts which have been produced since March 1974. The country may well be wondering why it is infinitely less damaging to the country than all its five predecessors. There should be an unseen attender at these debates. As I almost hear by hon. Friend the Member for Blaby (Mr. Lawson) saying sotto voce, it is to Dr. Johannes Witteveen that we owe a great deal of the credit for the comparative mildness of this Finance Bill.
The International Monetary Fund imposed last year, and is imposing this year, a limit on our borrowing requirement of £8,500 million. It is a limit which I regard as dangerously high, but just think, Mr. Deputy Speaker, what the Financial Secretary would have done if it had not been for Dr. Johannes Witteveen. Beside the right hon. Gentleman's bed, underneath the pillow of the Chancellor of the Exchequer, there should be a mini-photograph of the good doctor. It is to that doctor that the British people tonight should be giving a vote of thanks.
But it is not only to the good doctor. He has the main honours, but there is another reason why this Finance Bill is the least damaging of all those that have

appeared from the Treasury Bench. The harsh logic of parliamentary arithmetic has compelled the Government to introduce this year a Finance Bill less damaging than all the others.
Perhaps we may rehearse some of the concessions which have been wrung from the Government by the arguments of my right hon. and hon. Friends upon our Front Bench. Only three of them it is true, but three of the most distinguished, are upon our Front Bench tonight. The concessions are due to the arguments and the skill of my hon. Friend the Member for Blaby, my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and my hon. Friend the Member for Horncastle (Mr. Tapsell). We must, of course, also include my hon. Friend the Member for Norfolk, South (Mr. MacGregor), without whose encouragement, skill and disciplinary powers upstairs in Committee we would not have wrung all the other concessions from the Treasury Bench. It is perhaps to him that a special tribute is due.
Whom do we find confronting us? If you glance upon the Government Front Bench, Mr. Deputy Speaker, whom will you see? You see an hon. Member who is not yet a Lord Commissioner of the Treasury. He is an unpaid Whip. [HON. MEMBERS: "He is paid."] I apologise.

Mr. Alf Bates: I am merely underpaid.

Mr. Gow: Is not this an occasion? For the first time from the Government Front Bench we have heard the Whip addressing the House. Not upstairs in Committee but now, on Third Reading, we have an intervention—and upon what subject? He says that he is underpaid. He is not alone in that.
One of the extraordinary paradoxes we have seen in past months is that the Labour Party and Her Majesty's Ministers have been arguing that we should be holding down wages. That is why the Whip is underpaid. It is why others are underpaid. During the four years when the Financial Secretary has been at Treasury Chambers we have found that an increasing number of our citizens have been underpaid. When the Government Whip intervened and claimed that he was being underpaid, he was merely echoing the view held by an increasing number of our fellow citizens.
If you behold the Financial Secretary, Mr. Deputy Speaker, you will understand the concessions which have been wrung as a result of the arguments deployed by my right hon. and hon. Friends. We have had a series of confessions that that which the Government produced in 1974, 1975, 1976 and 1977 was wrong. In this Finance Bill we have had a profound and unprecedented confession of past errors.
What have we seen? We have seen relief for bad debts for the purposes of value added tax, for which my right hon. and hon. Friends have been pressing. We have seen the Government acquiescent in a reduction in the basic rate of tax from 34 per cent. to 33 per cent., for which my right bon. and hon. Friends have been pressing. We have seen maintenance payments for wives or ex-wives treated no longer as unearned income but as earned income, for which my right hon. and hon. Friends have been pressing. We have seen taxation relief for farmers, for which my right hon. and hon. Friends have been pressing. We have seen capital tax allowances for hotels, for which my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) has been pressing. We have seen reductions and reliefs in capital gains tax, for which my right hon. and hon. Friends have been pressing. We have seen reliefs from capital transfer tax, for which my right hon. and hon. Friends have been pressing.
All this has come about because over the past four years the Treasury Bench, reluctantly and without any enthusiasm, has been persuaded by the arguments of my right hon. and hon. Friends. That is why, as we come to the final chapter of this Bill, those of us upon the Opposition Back Benches are entitled to take pride in those who sit momentarily upon the Opposition Front Bench but who, in a few months' time, will be seated upon the Treasury Bench.

11.8 p.m.

Mr. Graham Page: As the speech of my hon. Friend the Member for Eastbourne (Mr. Gow) has shown, at this stage in the process of a Bill we are apt to look at the Bill through rose-tinted spectacles because we have suffered through the Committee and Report stages. The lenses of those rose-tinted spectacles are, on one side, the affliction of legislation

which we have gone through with Treasury Ministers, so much so that one feels a sense of brotherly affection for them. Through that lens of the spectacles, I thank the Treasury Ministers for the patience and courtesy shown to us on the Opposition Back Benches whenever we have sought to intervene.
The other rose-tinted lens is represented by the innumerable concessions, listed so well by my hon. Friend the Member for Eastbourne (Mr. Gow), which have been given to the Opposition throughout the Bill—the innumerable amendments for the good which have been made to the Bill through pressure from the Opposition.
But, no matter about these rose-tinted spectacles which are apt to make the Bill look a rather nice one, it is a terrible Bill, Mr. Deputy Speaker, and for one reason. It has set a precedent for retrospective legislation which has never before been seen in this Parliament—not just retrospective legislation to the date when an intention has been announced by a Government but going back to a date long before a Government have announced their intentions, so that the subject could not possibly know that he is doing wrong.
If this is to be a precedent for future legislation, should any Socialist Government come back to office for any length of time—which heaven forbid!—the Bill will go down as the most disastrous piece of legislation that we have allowed to go through this Parliament. To force through Parliament retrospection of that sort is an act of arrogant government and stinks of unconstitutional dictatorship.

11.11 p.m.

Mr. Vivian Bendall: I rise rather sadly tonight, Mr. Deputy Speaker, as my maiden speech in this House was during the first debates on the Budget, back in April. At that time I was rather heartened by the fact that the Government looked upon the youth of the country and upon small business men as people whom they believed should and could be helped in the present situation.
In the last few weeks we have seen the youth of this country, many of whom will leave school very soon, denied employment because of the 1½ per cent. increase in the employers' contribution. Many young people who will be seeking employment in the next few weeks may


well be denied that employment because of what has happened in the Budget.
The Government have said that they will help the small employer, but yet again we have seen that the employers' contribution is likely to put further small employers out of business. It must never be forgotten that they are still the largest group of employers of labour within our nation today.
As a newly elected and younger Member of the House I find this very sad, because I believe that this country, with its youth, has a great future. I believe that, if encouraged and given the right incentive, the youth can play a part in the future of this nation.

11.13 p.m.

Mr. Nicholas Fairbairn: There is one point that I want to make, Mr. Deputy Speaker upon the Bill. The national debt, as I understand it, was created in the year 1694. Two hundred and eighty years later, in 1974, after two and a half centuries of war and two world wars, it had reached £40,000 million. But it took only four years of this god-forsaken, dreadful Government to double it. It is now £80,000 million.
Tell that to the country. Tell it to the individuals with whom the Socialists are allegedly so concerned. I happen to represent, applying the arithmetic to my constituents, one-thousandth of the people of this country, because there are 35 million voters and I have 35,000 people in my constituency who are entitled to vote

Mr. Joseph Dean: That is very small.

Mr. Fairbairn: It is very small.

Mr. Dean: A parish council.

Mr. Fairbairn: Indeed, a parish council. But I also happen to represent those who live in an area of 8,000 square miles, which is one and a half times the size of Northern Ireland. Before Labour Members make silly remarks let them reflect on that.
But thank God that I represent those people. I represent one-thousandth of the people of this country. So we can say to ourselves a very simple thing when we

look at the debts which this Government have accumulated. The public sector borrowing requirement is £23 million a day—£1 million an hour with a lunch break. For my constituency, that represents £1,000 a hour. Last year, with all their genius and excellence, and with all that they arranged for the Jubilee event, the Government managed by charity to accumulate £14,000. On the extravagance of this god-forsaken Government, we would have run out of money at 3 o'clock on 1st January.
That is the extent of the ill health of the financial situation of the country. The Government have doubled the debt. That will be on our children and our grandchildren. It means £1,000 an hour for my constituency, £1 million an hour for the country—let every man, women and child remember that—in addition to tax and unemployment. Let anyone who votes for the Third Reading of the Bill condemn the fruitfulness of those who have achieved such a silly state in our finances.

11.17 p.m.

Mr. Nicholas Winterton: I shall be brief. I have listened to a great deal of the debate which has taken place on this important Finance Bill. We have heard the Government claim credit for many of the things which have been done to bring a better life for industry and for the ordinary man and woman. What we have not heard until tonight—from my hon. Friends the Members for Blaby (Mr. Lawson) and for Eastbourne (Mr. Gow)—is that some of the good things which have been produced in this Finance Bill have not been at the desire or the wish of the Government of the country—a Socialist Government—but have been brought about by the tenacious debating skill of the Conservative shadow Treasury team, and a very talented team it is.
We hear a lot from "Sunny Jim" about the achievements of this Government. Perhaps they will at last tell the nation the truth. The only things which have come out of this Government and which are any good have been produced by the skill and the tenacious debating ability of the Conservative Opposition.
No Liberal Member is here tonight to debate this Third Reading, yet the media have said time and again that it was because of the Liberals that the national


insurance surcharge was reduced from 2½ per cent. to 1½ per cent. There are only 13 Liberal Members, and there will be a lot fewer after the next General Election. But there are 280-plus Conservative Members. It was the vote of the Conservative majority which produced that reduction. Of course there should have been no increase at all, because, as my hon. Friend the Member for Ilford, North (Mr. Bendall) pointed out, this will be a deterrent to employment. This Government are responsible for the worst level of unemployment for about 40 years. That is the truth of Socialism.
My goodness, I think that the Financial Secretary must have been wrung into his seat on the Treasury Bench by the amendments which have been won by the Conservative Opposition and the concessions that have been made. I hope that he will admit the ability of the Conservative Opposition and the concessions which the Government have been forced to make. But will he also talk about the highest level of unemployment and the doubling of food prices, because that is the record of Socialism? I hope that he will offer a word of apology to the House and, through it, to the people for the purgatory which his Government have produced, because Socialism does not work.
This Finance Bill is not what the Opposition would have wished, but it is a lot better than many people hoped. If, however, the people thing that they have had a glimmer of hope from this Finance Bill, they have a great deal to look forward to when they have a Conservative Government later this year. We shall give the people the freedom and the encouragement that they want. We shall return, under a Conservative Government and with Conservative philosophies, to a free, prosperous and responsible nation.

11.20 p.m.

Mr. Robert Sheldon: The right hon. Member for Crosby (Mr. Page) talked about the affection that spreads through all parts of the House as a result of our experiences in Finance Bill Committee. Right hon. and hon. Members who have shared these sleepness nights share this affection. But I always find it surprising to see how many right hon. and hon. Members queue up for the rack year after year. There never seems to be any shortage of volunteers.
The hon. Member for Blaby (Mr. Lawson) called this a historic Finance Bill. One of my interests during recesses is reading bits of history. I do not think that this part of history is one to which I should turn readily, and those who come after us will have rather peculiar tastes if they look to our debates on Finance Bills for their entertainment.
The reduction in the basic rate of income tax from 34 per cent to 33 per cent., which, after all, was the major change in the Finance Bill as it went through the Committee and the House, and the increase in the higher rates of thresholds were the achievements of the Opposition, although they paid a heavy price for them. The price they paid was the national insurance surcharge, which is by no means as good a method of raising revenue as the income tax, and there are some hon. Members of Conservative persuasion who are beginning to believe that.
But a number of Opposition amendments succeeded. I know that it is the standard practice of all Oppositions at all times to claim many and important successes, and that at all times it is the attitude of the Government to take a rather relaxed view about these exaggerated claims. Governments understand all too well in our democratic House the necessary and frequent frustrations of Oppositions, and those who have shared the frustrations should be tolerant in understanding the problems.
I note the changes which we have been happy to agree, but I also note the shape of the Bill as it has emerged, compared with what it was originally. One has only to analyse the changes which have been made to get matters into perspective.
The hon. Member for Blaby talked about crises. It is the stock in trade of any Opposition to do that. However, gilt sales are well ahead for the year. Inflation is falling pleasantly. The growth in the economy is moderate, but I would not want to see it more than moderate because I believe that it must never be allowed to get out of hand. Production is rising, again moderately. We see small, steady improvements. We seem to he doing better than the forecasts in the Financial Statement and Budget Report for which I am responsible. We see the Finance Bill against the background of


the country's generally improving financial position.
Opposition Members have had the pleasure of examining our proposals and making the changes which we have been happy to accept in the main. I should like to refer to what we have done for small businesses and to the increases in child benefit and their consequentials for child tax allowances, which I believe are valuable improvements. There was also the concession on taxation of maintenance payments, which I particularly welcome because I have always felt that there was a really genuine grievance not in the grievance not in the theory of the scheme but in the way it worked in practice. I was very happy to be associated with that change. I should also like to mention the tax reliefs for profit-sharing schemes. Those who witnessed the long discussions that took place on that matter will realise that the scheme we finally came up with provides a useful framework for a fascinating experiment. It will be very interesting to see how industry uses these schemes. They could be very important or just a passing phase. It is up to industry to decide for itself. Those, like me, who believe that the major problems of industry must be solved by industry itself will look forward very much to seeing what happens.

Mr. Fairbairn: Can the Minister tell us whether it is true or false that this Government have doubled our national debt while they have been in office?

Mr. Sheldon: I must say that among the many indicators that I look at regularly in order to see how the economy and industry are faring, this is not the major one that concerns me. Therefore, I do not happen to have the figures with me, and on this occasion I do not think it is worth troubling my assistants for the answer.
There are a number of things that one can say about the passage of this Finance Bill. Generally, however, we have had good-tempered debates. If hon. Members visit Somerset House, they will find copies of all the Finance Bills and also a mass of descriptions and explanatory notes on these Acts. If hon. Members look at the Finance Bill files they will see that the last century occupies only half of these. It is only when one looks at the

last 10 or 15 years—not just the last four years—that one realises that the way in which we organise these matters may not be ideal.
This Bill should have had a more difficult passage than it received. This is not because of its content—I believe that is admirable—but because of the parliamentary situation. In bringing this legislation to its satisfactory conclusion, we should therefore record our debt to our Whips. We should also record a debt to the Opposition Whips. Both of these hon. Gentleman achieved the highest reputation among the members of the Committee, and I take pleasure in recording this.
The measures that we have brought forward are valuable, and I ask all hon. Members present to give the Bill an enthusiastic and unanimous Third Reading.

Question put and agreed to.

Bill accordingly read the third time and passed.

MARINE OIL POLLUTION

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

11.28 p.m.

Mr. Robert Adley: I turn from the problems of the national financial scene to a problem that is worrying many people almost as much—that of oil pollution at sea.
This is worry enough for those of us who represent coastal constituencies. It is a double worry when, off those coasts of our constituencies, oil has been discovered under the sea. In the case of south-east Dorset and south-west Hampshire we also have onshore oil as a potential threat.
Worry turns to fear when one considers the events of the last two and a half years—the "Urquiola" affair in La Coruna; the Ekofisk blow-out in the North Sea; and, more recently, the "Amoco Cadiz" and "Eleni V" disasters, with their tragic consequences. There was also a less-heralded event in southern England when there was a leak in the pipeline from Southampton Water to London. Subsequently electronic testing showed that there were 90 faults in


that single pipeline. So it is not surprising that people are alarmed at what could happen if these disasters strike near at home.
There has been widespread dissatisfaction with the way in which the Government handled the "Eleni V" affair. The Minister will know that there was widespread alarm at the implications of the "Amoco Cadiz" affair off the Brittany coast. We all know the phrase about Nero fiddling while Rome burned. It has looked to many people—the Select Committee on Science and Technology heard this yesterday from the county council representatives in East Anglia—that Her Majesty's Government appeared to dither over the case of the "Eleni V". While Governments dither, the oil industry relentlessly pursues its interests, sometimes with apparent disregard for the interests of the people whose livelihoods can be affected, particularly fishermen.
One of the points that I wish to make in my case tonight is that so many Government Departments are involved that the oil industry seems willing and able to pursue its own interests in the knowledge that whilst the Departments decide amongst themselves which is responsible, the industry does what it wants to do. We had an example recently in the English Channel, where BP and Gulf have been carrying out a seismic survey. They have caused considerable damage to lobster pots and fishermen's nets. The fishermen are ostensibly looked after by the Ministry of Agriculture, Fisheries and Food, whilst the oil companies are responsible to the Department of Energy.
I want to quote briefly from one or two letters that I have received from different Ministers, to illustrate the point that I am making. The Minister of State, Ministry of Agriculture, Fisheries and Food wrote to me on 9th June as follows:
Although John Silkin has no formal statutory obligations or authority for dealing with such matters, the good offices of our Sea Fisheries Inspectorate have been used in order to bring the fishing and oil interests together. I am glad to say that by working quietly behind the scenes the Inspectorate has already achieved some measure of success in cooling the temperature.
It should not be necessary to have to work to bring the fishing and oil interests

together. The Minister of State went on to say:
Immediately the local Inspectorate had heard of BP's activities they contacted my officials in London.
My contention is that if the oil companies had been observing the law, the fishing interests would have known beforehand what was going on, because the Petroleum (Production) Regulations 1976, schedule 5, paragraph 23, state:
The Licensee shall not carry out any operations authorised by this licence in or about the licensed area in such manner as to interfere unjustifiably with navigation or fishing in the waters of the licensed area or with the conservation of the living resources of the sea.
There is one of numerous examples that I could give where interdepartmental split responsibility has caused a great deal of unhappiness and discontent. Whilst the Ministry of Agriculture, Fisheries and Food and the Department of Energy have been trying to find out what has been going on, BP and Gulf have been having a ball in the English Channel.
The Under-Secretary himself wrote to me on 16th June. He always tells us—we accept this—that he and the Government have overall responsibility for oil pollution matters. But in correspondence concerned with the situation in the Channel, he said:
I am sorry that the Department of Trade's limited powers in this area do not allow us to take account of the interests of the fishing industry, other than to safeguard the navigation of their vessels.
That is quite unsatisfactory.
In the limited time available, I cannot possibly read out all the different ministerial responsibilities of Trade, Agriculture, Defence, Energy, Environment, Home Office and Industry which illustrate the point that I am trying to make. I take just one small item. The Ministry of Agriculture, Fisheries and Food is responsible for licensing chemical dispersants, but the Department of Industry is responsible for providing research on these dispersants. There are numerous other similar examples that one could give.
I have not taken an interest in this matter just recently, as the Minister will know. In fact, over two years ago I took a director of a company in my constituency to see one of the then Ministers at the Department of Industry because


he needed further assistance from that Department with his oil mop device, which is able to lift oil off water. In spite of persistent questioning, it has taken over two years for Warren Springs laboratory finally to get round to testing this oil mop device at sea. The oceangoing test has just taken place and I am delighted to say that it looks as though the device will be every bit as successful as we all believed it would be two years ago. This device, manufactured in my constituency, can have inestimable environmental advantages and can, I believe, bring tremendous economic advantages to the United Kingdom.
But the pressures from outside this country to steal our technology are well known. In the case of the oil mop device, when I went with my constituent to La Coruna I was confronted by some fairly ruthless people, and it was quite clear to me that if this country does not develop its own technology and keep it for itself, others will snatch it from us.
I was disgusted when I found that a Mr. Wayment, who had been working for the Department of Industry and who had been most unhelpful, had subsequently gone off and worked for an American competitor of the company in my constituency and had taken with him all the technology which he acquired when he was working at the Department of Industry. This is the sort of international competition and tactics that we have to face.
Having had a glimpse under the blanket of the tactics of the oil companies, I want to take a moment to examine the activities of Lloyd's and the insurance side of the oil pollution business. Oil insurance is very big business, and the Minister, amongst his many responsibilities, is responsible for insurance. It is estimated that the "Amoco Cadiz" catastrophe will cost the French authorities about £60 million. In this country, if we have a problem like the problem of the "Amoco Cadiz" I have no doubt that Lloyd's will very quickly pay out the money owing to the oil companies and tanker owners.
In my inquisitiveness I wrote to the chairman of Lloyd's on 4th April and asked him:
Can you tell me what, if any, checks you make on the proficiency, qualifications and behaviour of the crews on oil tankers before you

are willing to pay out insurance money? It is felt in some quarters that Liberian-registered tankers with a multinational crew are less likely to observe proper navigational rules than those observed by a British crew in a British ship and I would very much welcome your views on this point.
I was somewhat surprised to receive a reply from the deputy chairman of Lloyd's telling me:
Underwriters have no control over the proficiency, qualifications, and behaviour of crews on oil tankers. This is the responsibility of the Classification Societies and the Governments of the Countries in which the vessels are registered.
That is not a satisfactory situation. If one drives one's Mini along Whitehall and knocks into a bollard I have no doubt that the insurance company concerned will ask many searching questions about one's licence, insurance, tax and test certificate. It seems to me that there is rather less concern on the part of Lloyd's about paying out insurance premiums to the "drivers"—if I may refer to them thus—of 250,000-ton tankers than there is about Mini drivers driving up and down Whitehall.
I know that the Minister is looking forward to presenting us at some stage with a merchant shipping Bill. Eighty per cent. of the accidents at sea are caused through human error, and I certainly hope that we shall be ratifying the IMCO convention, which was agreed last Friday, because the question of competence is of very great concern.
Competence, however, is only one of the problems. The threat that our coastline faces is not just a threat of incompetence; it is a threat that is aggravated by the sometimes ruthless and aggressive and acquisitive actions of the oil companies themselves. I am not satisfied that the Government possess adequate machinery or powers to deal with the situation, so, in the few remaining minutes that I have I want to put to the Minister an eight-point plan.
Oil pollution ruthlessly threatens the livelihood of people everywhere, and also the environment. Ruthless action is therefore needed. We cannot wait for world-wide agreement. The EEC should act, because it offers a clearly defined areas in which inter-governmental action is possible.
In my eight-point "EEC Oil Charter" I want to ensure that the principle "The


polluter pays" becomes a reality. Failing speedy EEC agreement, Her Majesty's Government should act alone, now.
First, I want to see all oil companies world-wide registered in a special category before they can trade in the United Kingdom or the EEC. I call this the A list.
Secondly, all oil-carrying ships and their owning companies should be registered in a special category, which I call the B list.
Thirdly, the carriage of oil at sea within EEC territorial waters should be restricted to companies registered on the A list, in ships registered on the B list.
Fourthly, all companies on the A list to indemnify Governments whose territorial waters they enter against all costs of environmental pollution caused by collision or other source of pollution, such as washing tanks at sea.
Fifthly, an indemnity or oil fund to cover these anti-pollution costs should be financed by companies on the A list and held and administered by EEC sources. These funds should be available to Governments for research into anti-pollution devices, including the provision of standby tugs with anti-pollution devices aboard.
Sixthly, all companies on the B list should notify Her Majesty's Government of the competence of all senior crew who will be in charge of ships on the B list.
Seventhly, no tanker insurance should be provided by companies trading in insurance in EEC, unless clause 6 is fulfilled.
Eighthly, in the event of oil spillage at sea, the Government of the territorial waters concerned should have immediate call on the funds provided under clause 5 of my charter, such funds to be made available by the Government to local authorities or whoever is responsible for clearing oil from land or sea; and it shall be the responsibility of the relevant oil company immediately to refinance the oil fund after an accident involving its oil.
At the moment we merely pay lip service to the principle "The polluter pays". The ACOPS report, published in May this year, produced a whole series of interesting information. It said that all com

pensation depends on identifying the source of the pollution, but ACOPS states that in most instances the source of pollution cannot be traced. Thus, Government adherence to "The polluter pays" principle often carries little weight in practice. This seems to me to be a strong reason for suggesting that the strongest possible restriction should be placed on oil tankers entering our territorial waters.
If only registered tankers were allowed, perhaps we could do something about recovering the costs from previously unidentified pollution—the unglamorous pollution about which we hear little, but which is a constant scourge.
I referred earlier to the French Senate. In The Guardian of 1st July there was a very interesting report on the French Senate committee which was looking into the "Amoco Cadiz" affair. The report said that
proper control of pollution in the Channel could only be done with an investment of about £600 million, according to the Senate, which recommended that the prefect should have a fleet of helicopters, tugs, anti-pollution vessels and new radar systems under his control. It suggested that other European countries and petrol companies should help finance an anti-pollution plan.
The next disaster may be tomorrow's headline. The time to act is now. Prevention is better than cure. We cannot wait for the merchant shipping Bill, with which I am not satisfied anyway because the proportion of the Bill that deals with oil pollution is minimal. We have interdepartmental muddle and uncertainty characterised by the "Eleni V" affair. It is 11 long years since "Torrey Canyon". I ask the Minister "When shall we ever learn?"

11.44 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis): The hon. Member for Christchurch and Lymington (Mr. Adley), in a brief period, has raised a number of headline points, but I suspect that he has not done much research. He referred in the first place to the desirability of implementing the merchant shipping Bill. In his peroration, he said that he disagreed with the legislation and had doubts about it. The Government have every intention, as is exemplified by the fact that we introduced a White Paper to which the merchant shipping Bill was annexed, of implementing the Bill.
It is to the discredit of the Opposition that their trade spokesman yesterday denounced the need for the Bill and said that a Conservative Government—if, by some mischance, they were elected—would not introduce that legislation. He was running completely counter to the wishes of the whole shipping industry—owners and trade unions alike—and counter to the interests of the countless people who have contributed to the working party reports on pilotage, discipline, the employment of Asian seafarers, and so on. That shows the degree of responsibility of the Opposition.
This is not a satisfactory opportunity for discussing the pros and cons of the Government's actions over the "Eleni V". The matter is being considered by a Select Committee, to which my right hon. Friend the Secretary of State for Trade and I have given evidence.
I wish to rebut some of the hon. Gentleman's general allegations. It is easy to throw out such allegations in an Adjournment debate—wholly irresponsibly, wholly disregarding the available evidence, and claiming that the Government are to blame. Others will be able to pass a more authoritative judgment than can the hon. Gentleman, whose judgments in the House can scarcely bear the scrutiny of being authoritative in general terms.

Mr. Adley: Will the Minister give way?

Mr. Davis: No. The hon. Gentleman has had his go. I cannot cover all the ground that he covered, and I do not propose to deal with matters affecting fisheries, but I or one of my colleagues will write to him on that.
Although I have been given only short notice, I shall try to deal with the specific points that the hon. Gentleman raised at the end of his speech. I agree that the primary emphasis must be on the prevention of pollution, and my worry about the hon. Gentleman's proposals is that, in practice, they would have little regard to that consideration. We are determined that the United Kingdom should continue to play a leading role in the search for effective measures to reduce oil pollution from ships, but we must recognise that our coast may be polluted by vessels of any nation, not just by those trading with

Europe or ourselves. The problem can therefore be dealt with only on an international basis. If we are to avoid the anarchy of conflicting national requirements, that is the route that we have to travel. We have therefore directed our main efforts to action in IMCO, but there are no easy solutions. We need more dedication to resolve these problems through the international community than has been evident for a number of years.
There have been a number of important advances this year alone. In January, the 1969 amendments to the international convention on the prevention of pollution of the sea by oil, 1954 finally came into force internationally, and the amended convention lays down discharge standards which, if universally adopted, should substantially eliminate oil pollution as a result of routine ships' operations. It is worth noting that the adoption of these standards was made possible by the development, largely at the initiative of our own oil industry, of the "load-on-top" system.
In February, agreement was reached at the IMCO conference on tanker safety and pollution prevention requiring all tankers of 10,000 gross tons and above to have two separately operable remote steering gear systems. All such ships will also have to be fitted with at least two independent radars. In addition, more frequent inspection of the equipment of all tankers will be required. All this should significantly improve safety. Furthermore, important agreements were reached to deal with operational oil pollution by adopting requirements for segregated balance tanks and crude oil washing.
Safety depends largely on the human factor. It is with that in mind that IMCO organised a conference in London on the training and certification of seafarers during June and this month. The conference led to the adoption of the first international convention on standards of training, certification and watchkeeping for seafarers. Following a proposal by the United Kingdom Government, the conference developed and incorporated in the convention regulations and recommendations dealing with the special training of masters, officers and ratings of oil, chemical and liquefied gas tankers, which we shall ratify at the earliest opportunity.
We are also in the final stages of a joint study with France on a system of movements reporting by certain vessels carrying dangerous cargoes in bulk as they pass through traffic separation schemes in the Channel. That will have to be subject to international agreement through IMCO.
Reaching agreements on conventions and protocols is one thing, but they have to be brought into effect. It is encouraging that IMCO has now agreed on establishing a number of target dates. That should expedite implementation.
We have already ratified the 1974 safety of life at sea convention. Last month the Government published a White Paper to which the merchant shipping bill was annexed. We propose to see that implemented as soon as possible so that we can ratify international requirements much more speedily. The hon. Gentleman and his party do not want the Bill to see the light of day.
The North Sea states memorandum of understanding is important, but the hon. Gentleman did not mention that. It is designed to exert control procedures over the standards of merchant ships visiting the ports of the countries concerned. It came into force on 1st July. It covers both safety conventions agreed under IMCO and a series of conventions dealing with crew matters agreed under the auspices of the ILO.
Much has been achieved, but I agree that much more remains to be done, especially in bringing agreements into operation and enforcing them. We shall play our full part in that process.
I know that the hon. Gentleman has been much concerned about the mechanical recovery of oil. We have relied on the use of dispersants in dealing with pollution at sea because so far that has been seen to be the only method proven to be generally reliable and effective in the often turbulent waters around our coasts. There are other methods. There are booms and mechanical recovery systems. Warren Springs laboratory has been evaluating the more promising items of recovery equipment over the past two years. It is developing a system of its own design for use in the open sea. As the hon. Gentleman said, it is showing encouraging results. I shall not deal with

the specific recovery method that he has mentioned.
I turn to the specific proposals that the hon. Gentleman made. I doubt whether I shall be able to complete my consideration of them this evening. He has taken the trouble to devise a charter. It is not my intention to pour cold water on the proposals. However, there is a danger of heightening expectations with ideas that in practice may be unworkable.
The hon. Gentleman has suggested unilateral action. Prima facie, that is attractive, but in practice I do not believe that it will work. What is more important, unilateral action would diminish the authority of IMCO. It would thereby diminish the ability of the international community to devise and enforce international legislation, which I believe is the only effective way of doing something about the problems that concern the hon. Gentleman. Ships not visiting our ports or those of the EEC but using the waters of the North Sea, the Atlantic and the English Channel would be unaffected by the proposals that he has put forward.

Mr. Adley: No, they would not be unaffected.

Mr. Davis: Further, some of the hon. Gentleman's proposals interfere with the right of innocent passage. Has he considered the repercussions? Has he considered what effect it might have on our own vessels, which provide a livelihood for a substantial number of British seamen? That is a factor that I, as a Minister, have to take into account.
What would be the repercussions of the hon. Gentleman's proposals on the rest of our industry? Surely we must gauge that too. His proposals ignore the situation of North Sea States that are not within the EEC.
I suggest that the hon. Gentleman's proposals ignore the degree of international co-operation already existing, as exemplified by the North Sea States memorandum of understanding. It ignores the work that has been done through IMCO which is continuing and has had particular stimulus this year. It ignores the degree of Anglo-French co-operation, following "Amoco Cadiz", which introduced positive proposals. It ignores the Bonn agreement among a number of


nations in Europe, providing for assistance in time of emergency and for the exchange of information. It ignores the degree of anti-pollution work that has already been undertaken, in particular through IMCO and the certification of training of seafarers' conference—a monumentally important conference. It ignores the compensation provisions that exist and that would be improved by the coming into effect of the 1971 fund convention, expected shortly to come into effect. It ignores the fact that accidents occur to vessels when crews are already thought to be competent and whose certificates of competence would undoubtedly satisfy the hon. Gentleman's requirements as set out in paragraph 6.
I submit that none of the proposals, save perhaps those in paragraph 6, which are indefinite in any event, has a direct bearing on accident avoidance. That is the factor that is uppermost in the minds of all responsible Governments and has been uppermost in their minds, as exemplified by the February, June and July conferences that have taken place through IMCO.
I concede that we have a great deal to learn. That is why the Government are engaged in their own internal stocktaking at the moment. That is why many organisations are deeply concerned to learn lessons from "Amoco Cadiz" and "Eleni V". That is absolutely right. We do not have, and I doubt whether we shall have, complete answers to these problems. There is always room for improvement. If the Government have made mistakes, they will not be afraid of admitting them, because improvement is essential.
I believe that to reduce the authority of the organisation which, above all others, is able to introduce the international requirements, without which we

cannot take effective action and which would be the corollary of unilateral action, which the hon. Gentleman is at least in part advocating, would be a very dangerous step. It is one of the reasons why we urged the United States not to take unilateral action—a judgment which they accepted at the February conference of IMCO.
I believe that it is dangerous simply to talk in general terms, as the hon. Gentleman has done, although no doubt with the best intentions in the world. It heightens people's expectations that there are ready solutions available. There are not ready solutions available. We have to work and to research carefully. We have to do this assiduously and in co-operation with the oil companies, the shipping industry and the trade unions concerned, because they have a valuable contribution to make in all these matters. It is not good enough, in my judgment, to make generalisations and, indeed, condemnations as the hon. Gentleman has done, unfortunately without adequate research.
The hon. Gentleman was right about insurance. I have a responsibility in that matter. I am concerned about the role of the oil companies in chartering ships. But I am not prepared to condemn them without giving them an opporunity to answer the allegations that are frequently and generally made. I said to the House not long ago that I was proposing to call the oil companies in for a discussion so that I could hear what they have to say—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at two minutes to Twelve o'clock.